Today CBO released the fifth of its statutory reports on transactions undertaken as part of the Troubled Asset Relief Program (TARP)—the program established in October 2008 to enable the Department of the Treasury to promote stability in financial markets through the purchase and guarantee of “troubled assets.” The estimate of the cost of the TARP’s transactions provided in this report is the same as that provided in CBO’s most recent baseline budget projections issued on March 18.
CBO’s Estimate of the Cost of the TARP’s Transactions: $19 Billion
CBO’s analysis reflects transactions completed, outstanding, and anticipated under the TARP as of March 3, 2011. In sum:
The Costs Are Much Lower Than Originally Anticipated
When the TARP was created, the U.S. financial system was in a precarious condition, and the transactions envisioned and ultimately undertaken engendered substantial financial risk for the federal government. The costs directly associated with the TARP, when taken in isolation, have come out toward the low end of the range of possible outcomes anticipated when the program was launched; however, funds invested, loaned, or granted to participating institutions through the Federal Reserve and other government entities helped limit those costs. About 60 percent of the amounts disbursed to date has been repaid. Overall, the outcomes of most transactions made through the TARP were favorable for the federal government.
Activities of the Troubled Asset Relief Program
This report was prepared by Avi Lerner of CBO’s Budget Analysis Division.