March 28, 2012
Today CBO released the latest in a series of statutory reports on transactions undertaken as part of the Troubled Asset Relief Program (TARP)—the program 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." CBO also updated its infographic on the TARP, which summarizes the most pertinent details about the program since its inception: the types of assistance, cash disbursements, and net budgetary costs or gains.
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 $32 billion. CBO's analysis reflects transactions completed, outstanding, and anticipated as of February 22, 2012.
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 $56 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 December 2011 estimate?
CBO's current estimate of the cost of the TARP's transactions is $2 billion lower than the $34 billion estimate shown in the agency's previous report. That decrease in the estimated cost stems primarily from an increase in the market value of the government's investments in AIG.
How does the estimate compare with OMB's estimate?
The Office of Management and Budget (OMB), in its latest estimate, projects the program's costs to total $68 billion. CBO's current estimate is less than OMB's estimate, largely because CBO projects less spending for the Treasury's mortgage programs under the TARP; also contributing to that difference is CBO's higher estimate of the net gain to the government resulting from the Capital Purchase Program.
This report was prepared by Avi Lerner of CBO's Budget Analysis Division. The infographic was prepared by Jonathan Schwabish of CBO's Health and Human Resources Division and Courtney Griffith of CBO's communications team.