According to a Wall Street Journal report this morning, new estimates from the Treasury Department put the total cost for the Troubled Asset Relief Program (TARP) at $89 billion. This estimate does not include bailouts for government sponsored enterprises (GSEs) Freddie Mac and Fannie Mae, which are not included due to an accounting technicality.
As recently as a year ago, the Office of Management and Budget estimated the final tally for the bailout would be over $250 billion. Treasury Secretary Timothy Geithner estimated that the bailout will amount to about 1 percent of the United States’ GDP. In contrast the 1980′s savings-and-loan bailouts cost more than 3 percent of the GDP.
The much maligned program was designed to provide a lifeline to companies on the verge of collapse. The success and appropriateness is open to debate, but it does appear to have kept many of the “too-big-to-fail” firms from failing.
The Treasury Department recently disclosed plans to sell its 27 percent stake in Citigroup for a profit between 7 and 8 billion dollars. Financial behemoths Goldman-Sachs, American Express, and Morgan Stanley have all paid back TARP investments at a net profit to the government. General Motors has plans to repay its bailout money, and even AIG may be able to pay back the government by the end of the year. $169 billion of the $245 billion invested in banks has been repaid.
While many corporations have paid back or are in the process of paying back their emergency loans, Freddie Mac and Fannie Mae are projected to need federal money for the foreseeable future. The GSEs have received $126 billion in funds already. The Congressional Budget Office estimates that losses from the GSEs will reach $370 billion by the end of the decade.
The government is earning interest and dividends on a variety of other bailout investments, totaling nearly $14 billion so far.
The direct cost of the bailout is only part of the whole story. Analysts say it will take the country many years to recover from the increased debt burden and lost tax revenue that resulted from the economic crisis and resulting bailouts.
What is your take on TARP in light of these new developments? Join the discussion in the comments section below.
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