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 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 about $24 billion. CBO’s analysis reflects transactions completed, outstanding, and anticipated as of September 17, 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 roughly $51 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 $26 billion, in CBO’s estimation.
CBO has lowered its estimate of the cost of the TARP’s transactions by $8 billion since the agency’s previous report in March; at that time CBO estimated a cost of $32 billion. The decrease in the estimated cost stems primarily from an increase in the market value of the government’s investments in AIG.
This report was prepared by Avi Lerner of CBO’s Budget Analysis Division.