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CBO Raises the Cost of TARP

On Friday, the Congressional Budget Office released the latest of its required reports on the Troubled Asset Relief Program (TARP). The TARP was “established in October 2008, during the financial crisis, to enable the Department of the Treasury to promote stability in financial markets through the purchase and guarantee of ‘troubled assets,’” according to the CBO director’s blog.

Here is how the CBO director describes the “CBO’s current estimate” and the it differs from the CBO’s March 2011 estimate:

What is CBO’s current estimate?

“CBO estimates that the net cost to the federal government of the TARP’s transactions, including the cost of grants for mortgage programs that have not been made yet, will amount to $34 billion. CBO’s analysis reflects transactions completed, outstanding, and anticipated as of November 15, 2011.

“That cost stems largely from assistance to American International Group (AIG), aid to the automotive industry, and grant programs aimed at avoiding home foreclosures: CBO estimates a cost of $59 billion for providing those three types of assistance.

“But not all of the TARP’s transactions will end up costing the government money. The program’s other transactions with financial institutions will, taken together, yield a net gain to the federal government of about $25 billion, in CBO’s estimation.

How does the estimate differ from our March 2011 estimate?

“CBO’s current estimate of the cost of the TARP’s transactions is $15 billion higher than the $19 billion estimate shown in the agency’s previous report. That increase in the estimated cost stems primarily from a reduction in the market value of the government’s investments in AIG and General Motors.” (emphasis in the original)

The CBO also explained that their estimate “is less than OMB’s estimate, largely because CBO projects less spending for the Treasury’s housing programs under the TARP; that difference is partially offset by CBO’s higher estimate of the cost of assistance to AIG.”

In reporting on this latest news about TARP Reuters points out that “only $428 billion of the originally authorized $700 billion will be disbursed under TARP.”

Here’s a little more news that it seems neither Reuters or the CBO director bothers pointing out. Rick Moran points it out at the American Thinker:

“What's rarely mentioned is the actual amount given to GM and Chrysler to bail them out. Nearly $65 billion was paid out to buy stock and bailout GMAC, the finance company. The stock has decreased in value and the government won't sell it until the price is right.

“Any way you look at this boondoggle, it cost taxpayers far more than it was worth."

So once again, the grandees stick it to the taxpayers. Sheesh!

It's also worth noting the e21 blog (HT Rick Moran at AT) wrote on October 28, 2010, "Earlier this month, the Treasury Department’s Office of Financial Stability released a 100 page “Two Year Retrospective” on TARP, which defended various aspects of the program and updated some of their costs and repayments."

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