Report on the Troubled Asset Relief Program—April 2019
CBO estimates that the net cost of the TARP will total $31 billion—$1 billion less than it estimated in March 2018 because of a decrease in projected disbursements for mortgage programs. Almost all of the TARP’s transactions have been completed.
Summary
In October 2008, the Emergency Economic Stabilization Act of 2008 (Division A of Public Law 110-343) established the Troubled Asset Relief Program (TARP) to enable the Department of the Treasury to promote stability in financial markets through the purchase and guarantee of “troubled assets.” Section 202 of that legislation, as amended, requires annual reports from the Office of Management and Budget (OMB) on the costs of the program. The law also requires the Congressional Budget Office to submit its own reports within 45 days of the issuance of OMB’s report each year. CBO’s assessment must discuss three elements:
- The costs of purchases and guarantees of troubled assets,
- Information CBO collects and the valuation methods it uses to calculate those costs, and
- The program’s effects on the federal budget deficit and debt.
To fulfill that requirement, CBO has prepared this report on TARP transactions completed, outstanding, or anticipated as of February 28, 2019. By CBO’s estimate, $443 billion of the $700 billion initially authorized will be disbursed through the TARP, consisting of $441 billion already disbursed and $2 billion in projected future disbursements. CBO estimates that the government’s total subsidy costs—including those already realized and those stemming from outstanding and anticipated transactions—will be $31 billion.
The estimated cost of the TARP stems largely from ongoing grant programs aimed at preventing foreclosures on home mortgages, assistance to American International Group (AIG), and aid to the automotive industry. Taken together, other transactions with financial institutions have yielded a net gain to the federal government from interest, dividends, and capital gains.
CBO’s current assessment of the TARP’s costs is $1 billion lower than the $32 billion estimate it reported in March 2018. The decrease stems from a drop in projected disbursements for mortgage programs. CBO’s current estimate for all TARP transactions is $1 billion lower than OMB’s latest estimate of $32 billion because CBO projects a slightly lower cost for those mortgage programs.
The U.S. financial system was in a precarious condition when the TARP was created, and the transactions envisioned and ultimately undertaken entailed substantial financial risk for the federal government. Nevertheless, the TARP’s net realized costs have proven to be near the low end of the range of possible outcomes anticipated at the program’s outset, in part because investments, loans, and grants made to participating institutions through other federal programs and by the Federal Reserve have helped to curtail its costs.