CBO Updates TARP Tally: $24B Cost To Taxpayers

[Auburn85 424]

http://www.forbes.co...om-aig-bailout/

In the fall of 2008 when the federal government pumped tens of billions of dollars into America’s biggest bank, some expected it might never see any of that money back. That has proven not to be the case, and the latest update from the Congressional Budget Office projects the Troubled Asset Relief Program (TARP) will ultimately wrap up at a cost of $24 billion.

The TARP, initially positioned as a pool of money to purchase toxic mortgage assets from banks, was ultimately used to inject capital directly into financial institutions in return for preferred equity stakes. The investments started with the biggest Wall Street firms — Citigroup, Bank of America, Merrill Lynch,Morgan Stanley, JPMorgan Chase, Wells Fargo, Goldman Sachs, etc. — in the wake of the Lehman Brothers collapse in 2008.

The ultimate losses from TARP will not come from that first round of spending, as all of those initial bank investments have been repaid, but instead from the use of TARP funds to help smaller banks (minimally), as well as the extension of the program to pump $79 billion into automakers General Motors and Chrysler and contribute to the bailout of insurer American International Group.

According to the CBO, which made its latest projections based on data and share prices as of Sept. 17, the TARP portion of the rescue of AIG is expected to have a net cost to the Treasury of $14 billion. Treasury still owns 14.4% of AIG’s outstanding shares, but has drastically lowered its stake in the company over the past year. Most recently the department unloaded more than $20 billion worth of AIG shares in September. Overall, the government maintains that the combined efforts of the Treasury and Federal Reserve to rescue the insurer has already turned a profit.

The auto bailout, the CBO says, will ultimately carry a net cost of $20 billion, considering that the Treasury still owns approximately 32% of the outstanding shares of GM after selling a chunk of its stake in the car company’s November 2010 IPO.

Thursday’s updated CBO numbers conflict slightly with those of the Office of Management and Budget, which peg the ultimate cost of the TARP $39 billion higher at $63 billion. Most notably, the OMB estimates the cost of assisting AIG to be $22 billion and the auto bailout $25 billion, while tallying mortgage programs associated with TARP — a $16 billion cost according to the CBO — to a cost of $46 billion.

The two also differ on the returns delivered from the capital purchase program — the aspect of TARP that included the initial investments in the country’s biggest banks. The CBO figures the program will turn an $18 billion profit, while the OMB is counting on just a $7 billion net gain.

[BamaGrad03 146]

Honestly, if we are to take their projections that it saved the economy from epic collapse as truth, I'd say 24B isn't a bad final number.

[icanthearyou 4,399]

Honestly, if we are to take their projections that it saved the economy from epic collapse as truth, I'd say 24B isn't a bad final number.

If you consider the amount of debt taken on in the name of peventing the epic collapse, you know that number is much more than 24 billion.

[Auburn85 424]

If they were going to throw out billions of dollars for bailouts, you think they could have thrown out just a smidgen more to not screw the aut0 industry bondholders.