“It wasn’t fair, but it was necessary.” That comment about the Troubled Asset Relief Program (TARP), the Federal bank bailout program, from Treasury Secretary Tim Geithner last April seemed about the best that anyone would ever say of it. But with the program officially coming to an end on today (Sunday), some folks are pushing a different description: profitable. Even as voters rage and candidates put up ads against government bailouts, the reviled mother of them all — the $700 billion lifeline to banks, insurance and auto companies — will expire after Sunday at a fraction of that cost, and could conceivably turn a handsome profit for American taxpayers, reports Jackie Calmes of the NYTimes. “A final accounting of the government’s full range of interventions in the economy, including the bailouts of the mortgage finance giants Fannie Mae and Freddie Mac, is years off and will most likely remain controversial and potentially costly. But the once-unthinkable possibility that the $700 billion Troubled Asset Relief Program could end up costing far less, or even nothing, became more likely on Thursday with the news that the government had negotiated a plan with the American International Group to begin repaying taxpayers.” Read more here.
The Treasury never tapped the full $700 billion. It committed $470 billion and has disbursed $387 billion, mostly to hundreds of banks and later to A.I.G., the car industry — Chrysler, General Motors, the G.M. financing company and suppliers — and help for homeowners to avoid foreclosures.
When President Obama took office, the financial system remained so weak that his first budget indicated the Treasury might need another $750 billion for TARP. The administration soon dropped that idea as Mr. Geithner overhauled the rescue program and the banking system stabilized. Still, by mid-2009, the administration projected that TARP could lose $341 billion, a figure that reflected new commitments to A.I.G. and the auto industry. The Congressional Budget Office, which had a slightly higher loss estimate initially, in August reduced that to $66 billion. Now Treasury reckons that taxpayers will lose less than $50 billion at worst, but at best could break even or even make money. Its best-case assumptions, however, assume that A.I.G. and the auto companies will remain profitable and that Treasury will get a good price as it sells its corporate shares in coming years.
Source: New York Times
