CBO today estimated the Troubled Asset Relief Program (TARP) net cost to taxpayers will be $31 billion. This is roughly what it reported in July 2021, although a tad less than OMB’s latest estimate*. The estimated cost of the TARP stems largely from ongoing grant programs aimed at preventing foreclosures on home mortgages, assistance to American International Group (AIG), and aid to the automotive industry. Taken together, other transactions with financial institutions have yielded a net gain to the federal government from dividends, interest, and capital gains.
TARP, arguably the most contentious of the Federal government’s numerous attempts in 2008 to stop the U.S. and global economies from sliding into another Great Depression or worse, prevented the collapse of the financial system by bailing out profligate and reckless Wall Street firms and insurance companies.
To AutoInformed’s knowledge not one person at the firms responsible has been successfully prosecuted for what was rampant financial fraud that caused the housing and stock markets to collapse as the ratings agencies paid by the swindlers continued to claim the complex financial instruments issued were investment grade when they were indeed junk. Junk bonds – never has a financial instrument so honestly been named.
All told, actions by Treasury, the Federal Reserve, and the Federal Deposit Insurance Corporation (FDIC) reluctantly started under Republican President Bush and expanded and successfully implemented under Democratic President Obama turned the ailing economy around, albeit slowly and still with some harm to honest individuals, U.S. wealth creation and tax revenues. Critics back then included many Republicans (Junk Republicans or Republican idiotology?) said the government should have stood back and let the failed and frozen markets sort themselves out, a distinctly dubious if not absurd proposition bordering on fantasy – or outright lying in many peoples’ view – given that the private capital markets were frozen with fear of lending to over-leveraged firms.
In October 2008, the Emergency Economic Stabilization Act of 2008 (division A of Public Law 110-343) established the Troubled Asset Relief Program (TARP) to enable the Department of the Treasury to promote stability in financial markets through the purchase and guarantee of “troubled assets.” Section 202 of that legislation, as amended, requires annual reports from the Office of Management and Budget (OMB) on the costs of the program. The law also requires the Congressional Budget Office to submit its own report within 45 days of the issuance of OMB’s report each year. CBO’s assessment must discuss three basics:
- The costs of purchases and guarantees of troubled assets,
- Information CBO collects and the valuation methods it uses to calculate those costs, and
- The program’s effects on the federal budget deficit and debt.
CBO says that TARP transactions completed, outstanding, or anticipated as of March 31, 2022. By CBO’s estimate, $444 billion of the $700 billion initially authorized will be disbursed through the TARP, including $0.2 billion in projected future disbursements. (About $410 billion of the total amount was disbursed by March 2011.) CBO estimates that the government’s total subsidy costs— including those already realized and those stemming from outstanding and anticipated transactions—will be $31 billion.
- Treasury Makes $245 Million in Added Profits from TARP
- Treasury to Sell Preferred Bank Stock Acquired Under TARP
- Taxpayers to Turn Profit from Controversial TARP Bailouts
- Treasury Receives $2 Billion TARP Repayment from American International Group. U.S. Taxpayers Still out at Least $51 Billion
- Troubled Asset Relief Program – Total Cost $32B
- Ally Bailout Terms Met – Allowing for Common Dividends
- Treasury No Longer Owns GM Common Stock
- Treasury Selling More GM Common Stock
- Taxpayers to Recoup $1.3 Billion on Latest GM Stock Sale
- Treasury Selling More GM Common Stock
- Treasury to Sell 242 Million Shares of General Motors Common
*CBO’s current estimate is lower than OMB’s latest estimate of $32 billion, by less than $1 billion, because CBO projects a slightly lower cost for mortgage programs. Data sources: Congressional Budget Office; Department of the Treasury. See www.cbo.gov/publication/58029#data.