Treasury Lowers Projected TARP Cost by $11.4 Billion
By: Carrie Bay
New figures released by the U.S. Treasury indicate that the government’s $700 billion Troubled Asset Relief Program (TARP) – used for the financial and auto industry bailouts, and to a much smaller extent, for a national foreclosure prevention program – will wind up costing taxpayers $105.4 billion when all is said and done.
That projection is $11.4 billion lower than the administration had previously estimated in the president’s fiscal 2011 budget. The bailout price tag, though, could go even lower. Revised estimates are fully expected, as the Treasury has issued new cost figures regularly over the past year. As recently as last August, the administration estimated the cost of TARP would be $341 billion.
Treasury says its cost projections have improved as the value of some major investments made to prop up the financial system during the crisis have increased, and
TARP repayments have been greater than initially anticipated – approximately $190 billion has been returned to the Treasury from bailout recipients.
“TARP has succeeded in achieving its intended goal of stabilizing the economy and putting America back on track for future growth,” said Treasury Assistant Secretary Herb Allison. “[N]ot only have we averted an economic catastrophe, we’re in a stronger position sooner than anyone predicted.”
According to Treasury, the decline in TARP costs is primarily a result of appreciation in the value of the 7.7 billion shares of Citigroup common stock held by the government. As of March 31, 2010, each share had a market value of $4.05, or $0.80 over the price per share when the company’s preferred shares were converted to common equity by Treasury.
In addition, the estimated value of Treasury’s investments in the auto industry has increased as the outlook for the domestic automobile industry has improved, officials said. The Treasury also noted that costs related to AIG have decreased by $2.9 billion as prospects for the company have improved.
The total expense of TARP to taxpayers can be directly attributed to the government’s homeowner relief programs, as well as the assistance provided to the automotive industry and AIG. Programs that were designed to assist banking institutions will result in a net gain to the taxpayer, according to the Treasury.
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