TARP Bailout Could Cost Less Than $50 Billion -- Or Even Turn A Profit, Treasury Says

The often-criticized $700 billion bailout, known as the Troubled Asset Relief Program, might end up costing taxpayers less than $50 billion, and could even reap a profit, the Wall Street Journal and New York Times report.

The government never used that full $700 billion, according to the NYT: It pledged $470 billion and actually spent only $387 billion, mostly on aid to AIG, banks and car companies (the rescues of Fannie Mae and Freddie Mac happened before TARP). The program is set to expire this week, and by Treasury Secretary Tim Geithner's estimate, it's ended up in much better shape than initially expected.

Now that AIG has reached a plan to repay its government loans and phase out government ownership, Geither, who had a Thursday briefing with Obama, has estimated that the TARP program will prove to be a good investment. The NYT notes, though, that in order for taxpayers actually to make money on the deal, the Detroit car companies and AIG (which received the biggest rescue) will all have to remain profitable.

Despite its apparent success, TARP remains a political liability. As the NYT says, fewer than 3 in 10 Americans believe it was necessary to prevent financial collapse. "This is the best federal program of any real size to be despised by the public like this," Douglas J. Elliott, of the think tank Brookings Institution, told the newspaper.

As Simon Johnson writes in the NYT, the nature of the program's implementation has hurt its popularity: "TARP was an essential piece of a necessary evil -- that is, it saved the American financial system from collapse, but it was put in place in a way that was excessively favorable to the very bankers who had presided over the collapse."

ABC News says that "bailout" is "the dirtiest word in politics." It's rivaled, no doubt, only by "stimulus."

Comments

[Marcospinelli]

03:01 PM on 11/11/2010

"Why Aren't We Demanding Restitution?"

On Dylan Ratigan, Eliot Spitzer and Larry McDonald explain how banks paying back TARP monies doesn't begin to cover what's been stolen.

Watch it here.

[Gibbon2010]

10:46 AM on 11/11/2010

BS. The people making these claims know damn well that a lot of wealthy individuals got their personal assets saved by giving them access to public money. In other words, the rest of us take our chances, by the really wealthy have their golden parachutes. Anyone who plays that game doesn't belong in public office.

[fbros]

09:04 AM on 10/16/2010

You can do anything with voodoo accounting. Leaving liabilities off the ledger, leaving debt off the ledger. Now, you are unable to believe any financial information that is thrown around.

[gnomic]

02:26 PM on 10/04/2010

That's great. Only $50B. Here's an idea. Let those who are benefiting from TARP pay off that $50B. The rest of us will wait over here in the unemployment line. Hopefully Timmy will join us soon at the back of the line.

[karen1p]

02:24 AM on 10/04/2010

Timmy, what about the back-door bailouts? How 'bout that JPMorgan request that FDIC be on the hook for more money in the WaMu "purchase." How much will the taxpayers end up paying JPMorgan to "buy" WaMu???

You are ridiculous.

Also, Timmy, it looks like your banking buddies may be on-the-hook for quite a bit of money as it relates to these illegal documents they are filing to foreclose. Your boss did say, "No more bailouts." We will be at your door if there is even the slightest hint you are caving to the banking mafia. You won't survive, nor will your boss.

[CLSayles]

07:16 AM on 10/04/2010

Ah, our finest political minds at work here. Let's give her a big hand or better yet, the big finger. Stop sounding like a Tea Bagger and exhale. Things are getting better...

[karen1p]

09:18 AM on 10/04/2010

Gee, last I heard I still had the civil right to criticize my government. Or are you saying that if I choose to, you will assume I am a right-wing tea bagger?

Well, let me tell you....the most major story broke last week....major banking mafia willingly pulling their fraudulent documents to withdraw the chance that they may receive MORE sanctions by the courts. You heard that right they WILLINGLY pulled the foreclosure sales. AND. NOT. ONE. WORD. FROM. TREASURY. OR. THE. WHITE. HOUSE.

Sure sounds like collusion to me........and the green light for those same financial mafias to continue the illegal sales of foreclosures in 27 states.

Dam straight I am rageful. So, call me a bagger if you must. I voted for this set of clowns.

[GlenJo]

02:12 AM on 10/04/2010

TARP was the tip of a massive Wall St bailout:

http://www.ritholtz.com/blog/2009/06/bailout-costs-vs-big-historical-events/

Bankruptcy is the normal process, but it was not used. As a result, we have TBTF Wall St banks which are now larger, more reckless, and out of control, and toady regulators which have been bought by the banks.

Paulson/Bush started the bailouts in 2008, but after the elections, there was a big debate about what to do, complete with very different proposals by economists like Stiglitz:

http://www.youtube.com/watch?v=kz-zcal1nDo&feature=channel

Geithner's approach won. Bankruptcy would not be used on the banks, but it would be used on GM, one of the largest global multi-nation corporations in the world.

Could it be because bankruptcy means auditors will examine the books? Here's what happen when the auditors went through Lehman Bros. books:

http://www.independent.co.uk/news/business/news/fraud-charges-loom-for-lehman-bros-1920944.html

Massive fraud.

If Obama can argue that we cannot "give the keys to the car" back to the Republicans, then why did he give the keys back to the Wall St banks that did the exact same thing?

Just yesterday, Gretchan Morganson predicted, we would have to bail the banks out again:

http://www.nytimes.com/2010/10/03/business/economy/03gret.html

So if TARP was so successful, why are there predictions we will have to do it AGAIN?

[inmyhumbleopinion]

02:02 PM on 10/03/2010

Call me a skeptic, but I'd like to see a couple of other independent 3rd parties do an analysis of the TARP outcome. While the NYT and the WSJ are an outstanding news sources, Wall Street is a huge portion of New York City's finances, and their readers are a bit biased toward the ultimate success of that industry.

[USNDC]

11:07 AM on 10/03/2010

Gallows or firing squad ?

[karen1p]

02:26 AM on 10/04/2010

I would personally like to kick the stool out from under their feet.

[nothingchanges]

09:51 AM on 10/03/2010

IMO, the biggest "cost" of the TARP bailout, was the trust that was lost by a great many of our people (myself included) in the basic integrity of our government, and who our "representatives" really represent.

What valuation do you put on trust?

How do you buy it back?

To allow billions in tax supported bonus money to be paid to employees of the very institutions bailed out of the financial meltdown, showed a lack of oversight almost beyond comprehension.

"A people that values its privileges above its principles soon loses both."
(Dwight D. Eisenhower, Inaugural Address, January 20, 1953)

A concept apparently lost on those that occupy high office.

[MikeTN]

07:00 AM on 10/03/2010

The last time I looked 50 Billion was a h*ll of alot of money. One Billion is one thousand Million. So we are talking about 50 thousand Million Dollars. For One Billion you could employ 20,000 people for one year at a salary of $50,000 For 50 Billion you could employ one Million people at $50,000 per year for one year. Cut that in half and you could employ one Million people for two years.

Keeping this in perspective, the Stimulus program, which was around 800 Billion Dollars, saved or created only 2.5 Million jobs (according to the Government). For the same amount of money you could employ 16 Million people for one year at $50,000 per year

Doesn't the Federal Government have accountants ?

[maxhardon]

03:46 AM on 10/03/2010

Apparently it is still the utmost priority of both Dems and Repubs to preserve our socialized banking system and keep the casino game running. At the expense of everyone in this country who has to work for their money.

[twoto2]

03:22 AM on 10/03/2010

"May only end up costing us $50 Billion"? Why should this be a statement of Optimism? How many American kids could have been helped by $50 Billion? How many Vets? Is this suppose to cheer the public up after they failed because they thought they had all the answers? WTF!

[Cougar28]

12:11 AM on 10/03/2010

Fire Timmy now!!!

[funkalicious]

11:06 PM on 10/02/2010

What economics school did"Busmeat" graduate from, The money was loaned and should be payed back with interest loing 50 billion or 200 billion and then running deficits of trillions of dollars as far as the eye can see to get pai d back a portion of the money while the bankers were paid out 50 to 100 billion in bonus money doesn't seem like a win to me.

Remember Busmeat Geithner was overseeing these banks as they engineered the largest failure of the banking and credit system in history withe bogus CDO's CDS's and building a monetary system based on a pile of bad mortgage loans.
But I guess its all good in the Hamptons and Greenwich CT so its all good Tim why is this guy not road kill yet? Isn't there a dog catchers job in the Hamptons he wants to run for?

[IfIonlyknew]

12:23 AM on 10/04/2010

Well said friend.

[leftLibertarian]

10:02 PM on 10/02/2010

Weasel word alert 'could.'

But Timmy - if Joe's pizza parlor is not doing well because he pizza s&cks, does he get a bailout?
Timmy says bailouts are only for well-connected companies who bribe public officials - I mean give campaign contributions.