The real cost of the bailout, or: happy birthday TARP!

Yesterday was the 4th anniversary of the Troubled Asses Relief Program, or TARP. The popular narrative goes two ways - either this was a huge government gift to banks, or this was a program that saved the world, and turned a profit at the same time. I've heard both versions. To celebrate its anniversary, I thought I'd look into the claims.

The part a lot of people tend to talk about was the Capital Purchase Program, where the government bought preferred stock in crashing companies. According to 2012 numbers from the GAO, "[a]s of January 31, 2012, the Department of the Treasury (Treasury) had received $211.5 billion from its CPP investments, exceeding the $204.9 billion it had disbursed." It's not fair to say it turned a profit, as there were several years between loan and payment, but it's not really a massive loss either. Call it even.

The takeover of Fannie Mae and Freddie Mac, which was really a rescue of the banks they owed money to, was not quite as successful - according to a Bloomberg article on the subject, the companies "have drawn $190 billion in aid and paid $46 billion in dividends since being taken over by U.S. regulators in 2008". So a loss - a big one.

It turns out the folks over at ProPublica have been doing these number runs too, and have a bailout scorecard which details all the rest of the bailout bits. Their numbers indicate that neither TARP nor Fannie/Freddie were profitable, and then go on to talk about all the other bailout bits, like the auto companies and AIG. Their estimate of the total cost of the bailout: $174 billion.

David commented:

I'm kind of inclined to leave that typo in there. "Troubled Assets" is much less interesting than "Troubled Asses"

on Thu Oct 4 11:25:57 2012

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