Cooking the books

The Treasury Department said Monday it will begin selling its stake in the giant banking firm Citigroup Inc. at a potential profit -- based on the current stock price -- of about $7.5 billion. The move is seen as a major step in the government's effort to unravel investments it made in struggling American banks via the $700 billion Troubled Asset Relief Program, a year and a half ago.

With the sale of the Citi shares, the eight major banks that got bailout funds will have repaid the government in full. Those investments have netted the government $15.4 billion from dividends, interest and the sale of bank stock warrants, which gave the government the right to buy stock in the future at a fixed price.

Overall, it's a 14 percent rate of return on the $165 billion invested in the biggest banks. Hundreds of smaller banks also received money and have been paying the government a steady stream of dividends and interest, as well.

The federal government has actually figured out to show a profit on something? What the heck -- maybe Washington should go into the banking business full-time, some wags now propose. Unfortunately -- or fortunately, to those not ready to see our economy run quite like those of Berlin in the early '40s, or Moscow in the 1950s -- it's not quite that simple.

"It's baloney to say we've made money off the bank bailouts,'' Simon Johnson, a professor at MIT and a former chief economist at the International Monetary Fund, tells The Associated Press. "You have to add up all the money we've put into the economy and other firms."

In addition, some good timing with the bank stocks doesn't come close to covering the money Washington poured into such failing, union-crippled operations as General Motors and Chrysler, which show no signs of doing anything but continuing to hemorrhage cash. The bailouts of mortgage giants Fannie Mae and Freddie Mac, which were not included in TARP, will add billions more.

When all is said and done, the bailouts will end up costing taxpayers about $100 billion, according to current estimates. Too, ill-considered political intervention has slowed the correction that would have occurred.

Finally, the awful precedent is now set that the federal government ­-- in complete defiance of its list of limited powers -- feels free to "invest in" and thus grab any sector of the private economy at any time, "for its own good."

Do we really want to go much farther down this road?