Big Company Profits are Back
Section: Business & the Economy
The above chart from Chart of the Day shows that corporate profits have risen dramatically since the 2009 economic collapse. With 84% of S&P 500 corporations having reported their second-quarter earnings the Chart of the Day shows that big corporations have made a dramatic recovery. The S&P tracks the 500 largest publically traded corporations in the United States. The S&P 500 chart shows that earnings declined over 92% from a 2007 peak to a 2009 low which brought inflation-adjusted corporate earnings near Great Depression lows. Since 2009, S&P 500 earnings are up over 1100% after adjustment for inflation.
The purpose of the bailout was to prevent an economic collapse and at least for the largest companies it has apparently succeeded. So how much did tax-payers have to pay for the corporate comeback? The bail out of Chrysler and GM cost 19 billion and the Troubled Asset Relief Program under both President Bush and Obama cost taxpayers $59.75 billion. However, it’s still unknown how much the LIBOR manipulation scandal cost taxpayers. SEC enforcement to date has only recaptured $2.18 billion. Goldman Sachs won’t face U.S. charges for mortgage securities.
The political consequences of the corporate comeback are uncertain because polls show most people don’t understand that most of the bailout money was repaid by the companies. Political rhetoric hasn’t contributed to public misunderstanding. For example, President Obama’s claim that the auto bailout didn’t cost the taxpayers anything is as fact-free as the Republicans claim that the President is part of a spending inferno.
The real cost of the financial crisis continues to be job and income losses. The current unemployment rate is 8.4%. It was 4.4% before the crisis. The median family net worth is at its lowest levels since the early 1990s. According to the Federal Reserve, the median family had a net worth of $77,300 in 2010, compared to a net worth of $126,400 in 2007. Similarly, the U.S. savings rate is at a four-year low.
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