Geithner: TARP Will Cost Taxpayers Under $50 Billion

As the Troubled Asset Relief Program winds down, post-mortems for the program are rolling in. According to Treasury Secretary Timothy Geithner, the bailout effort — which was launched by former President George W. Bush in 2008 and officially ended last month — will end up costing taxpayers a mere $50 billion, rather than the $350 billion that the Congressional Budget Office pegged it at last year.

In a Washington Post article, Geithner lays out what he calls the “Five myths about TARP,” including:

1. The TARP cost taxpayers hundreds of billions of dollars.

…[T]he cost of the TARP, which succeeded in reducing the overall economic damage, will be considerably lower than once feared. In fact, the direct budget cost of the program and our full investment in the insurer AIG is likely to come in well under $50 billion — $300 billion less than estimated by the Congressional Budget Office last year. And taxpayers are likely to receive an impressive return (totaling tens of billions) on the investments made under the TARP outside the housing market. …

3. The TARP was a quick fix for the market meltdown but left our financial system weak.

The U.S. financial system has been completely overhauled and is in a much stronger position today than before the crisis. In fact, the weakest parts of the system are gone. Of the 15 largest financial institutions before the crisis, four are no longer independent entities. Five were forced to restructure. Two have altered their legal form and are subject to much stricter federal oversight. Ten have seen major changes in senior management and boards of directors.

Geither also writes that TARP helped prevent a “broader collapse and losses of millions more jobs and trillions more dollars in income and savings” and that, despite claims that the program is part of an effort by the government to “assert more government control over the economy,” the administration has focused on getting “out of the private sector as quickly as possible.”

Five myths about TARP, according to Treasury Secretary Tim Geithner [Washington Post]

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  1. TuxthePenguin says:

    I’m not even going to touch this one… there’s so much spin in this article I’m getting dizzy… just go back and read all the different qualifiers he puts in…

    • eyesack is the boss of the DEFAMATION ZONE says:

      …He has to. He’s talking about projections of revenue. As in, haven’t yet occurred. Would you trust an earnings report that projected “AWESOME PROFITS FOREVAR”?

      There’s even a best-case scenario of making a decent profit off of AIG and such. He didn’t go down that path, because unfortunately it’s not likely. He made a midrange projection, and this is where the numbers are. What else would you expect?

      As for the spin, well, he’s a government official. But nothing he said was wrong.

    • grapedog says:

      This article by Geithner is a total ballwash and it’s a complete lie, from head to toe. How many new government agencies and laws were created/pushed through, but there is no desire to exert more control by the government?

      That TARP money should have been set aside for the FDIC. Guarantee the money in the accounts, let the money die, and let people claim their money through the FDIC. That puts the money directly into the hands of the people it belongs to. A bunch of companies who have NO FUCKING BUSINESS remaining in business spin down and sell off assets as they collapse, and new banks pop up and replace them.

      Total ballwash… and I’m still pissed at all you folks who were for TARP and the bank bailouts!

      • Loias supports harsher punishments against corporations says:

        Sounds brindly angry, but completely incomprehensible.

        • grapedog says:

          It should say “let the businesses die” or “let the banks dies”, either one would have worked. I’d maim for an edit button on this website!

          • Loias supports harsher punishments against corporations says:

            That doesn’t help.

          • TouchMyMonkey says:

            And tell me, what would have been the outcome if the government had done nothing about the banking crisis? You must be some kind of genius; I can tell by the erudite language of your first post. I’m on tenterhooks; I simply must know what your estimation of the likely outcome of the government just letting the banks fend for themselves.

      • palfas says:

        It must be wrong because it was written by Geithner, not because you can show data proving otherwise. AMIRITE?!?
        Exactly 0 agencies where created by TARP and no laws that I know of. There where other agencies and laws created in relation to the economic bail out, but they are not part of TARP.

        Seriously, take a chill pill and turn off FOX news.

    • palfas says:

      I think what you mean to say is that you cannot directly refute any claims made in the article so you are resorting to calling the whole piece bunk.

      Nice argument there.

  2. milkcake says:

    $166 per person in the US. Not bad…

    • Oranges w/ Cheese says:

      I can afford that :)

      • Galium says:

        $166.00 per person includes children, disabled,elderly etc. A working person would end up paying 3 to 4 times that amount at least. The poster must work for the government.

    • TailsToo says:

      So how much of the big bank profits will we each get for our $166? Oh, yeah, that would be nothing. At least we can enjoy hearing about how the executives love their yachts while their bank forecloses on our homes.

  3. lawnmowerdeth says:

    I won’t hold my breath for my ‘impressive return’ to show up.

  4. jp7570-1 says:

    Gee, ONLY $50 billion, what a bargain! This reminds me of the old story (joke) about the kid telling his parents all sort of outlandish things (house burned down, dog died, etc.), just to say it was all a lie and that he really got a “D” on his report card.

    TARP may go down as the largest bait-and-switch scheme in history. “Too big to fail” is a pill that is too bitter to swallow.

    • DanRydell says:

      $50 billion is not very much compared to the damage that would have been done without TARP. TARP was a great bargain.

  5. eccsame says:

    Only 50 billion!? They should’ve bought two!

  6. Blueskylaw says:

    “will end up costing taxpayers a mere $50 billion”
    “taxpayers are likely to receive an impressive return”

    You know, these two sentences do not belong together.

    • Loias supports harsher punishments against corporations says:

      Cost is defined – the numbers processed say it cost 50 billion.

      But some of that cost includes purchasing investments, which like many investments may produce a profit.

      Not too crazy a concept.

      • Blueskylaw says:

        If I invest $1,000,000 in several stocks and 2 years from now I cash out and only receive only $200,000 then I, in strict accounting speak, LOST MONEY!!!! It is irrelevant if some stocks made me money, my total return is negative. There is nothing positive to spin here.

        • Loias supports harsher punishments against corporations says:

          Except that he misquoted Geitner by taking two quotes from different sections of the article and meshing them together. The only “spin” you are interpreting is the idea these two quotes are related when they are not.

          One refers to the net amount of money we spent on the whole thing. The other refers to the potentially for some of the money we spent to be returned to us later in the form of profits.

          Long story short: RTFA before you speak.

        • humphrmi says:

          You’re mixing Macroeconomics with Microeconomics. If you invested a million, made $200,000, and created 50 jobs that resulted in 2.5MM in income, from a government standpoint, you helped us all make a profit, with our thanks.

  7. Ouze says:

    If it cost only 50 billion, how come the program ran out of the first half of funding ($350 billion) in December 2008, and had to get a second round of funding?

    • Loias supports harsher punishments against corporations says:

      Just a hunch, but some of the money was given out and then repayed. For many businesses, big and small, some of them just needed capital to invest.

      • TouchMyMonkey says:

        And since the money gets paid back to the Treasury, it also gets “paid back” in a manner of speaking. The Treasury can print money, sure, but it can also send it to the shredder, reducing government liability, in other words, the deficit people keep crying about. TARP came in $300 billion under budget, so the deficit is $300 billion smaller than it otherwise would be.

        • Loias supports harsher punishments against corporations says:

          Somehow I feel like it won’t work out that way. Somehow…. we’ll still lose that $300 billion.

        • richkee says:

          If you think the US Treasury is where our money comes from you are mistaken.

  8. pegasi says:

    if it cost 50 billion ( a negative) then there is no return on “investment” (a positive) to the deal. So ‘joe taxpayer’ still got taken to the cleaners for 50 billion to save these companies butts for their shoddy business practices.

    Looks like an overall loss to me, no matter how you “spin” it. Dog poo is still dog poo, no matter where it’s at.

    • Loias supports harsher punishments against corporations says:

      Get real. 50 billion to save America? Okay, so it’s not that dramatic (depending on who you talk to) but assuming you believe it prevented the banks from all dying, then 50 billion to save an entire industry is a pretty good deal.

      Plus you are forgetting about the investments some of that money made, some of which will definitely turn a profit.

      • grapedog says:

        what do you mean “save america”? we would have been MUCH better off to let those businesses fail. You know who sold you the dog and pony trick about “america collapsing” right?

        All that bad debt is STILL IN THE SYSTEM… that money was a float until the economy recovers enough for house prices to get back to their previous levels, and to avoid having to actually show a true value for those assets. Most of the assets banks have have false valuations attached to them. Still think that house down the block is worth $250,000? No one else does, but the bank is claiming that it’s worth that much, so it’s assets look better and it’s leverage ratios look better.

        The system is still fucked, Geithner and Co are a bunch of fucking crooks, and they took your fear and turned it into a big fucking payday for a lot of people, and tons of people not even in this country. All that money to AIG just went over-seas to pay off foreign banks…

        So, thanks for buying into their bullshit story and enabling them to continue to fuck you, your kids, your grandkids and your grandkids kids.

        • Loias supports harsher punishments against corporations says:

          Why are you calling Geitner a crook when it’s the banks who got us into this mess.

          Blame the banks, man. Not the ones trying to do something about it.

        • Gulliver says:

          Drink some more tea and head to your party

        • sullivanftw says:

          seriously?! the system still has issues, but letting those business (and AIG) fail would have meant massive worldwide financial collapse–which means everyone on here would be posting while looking for their next job.

  9. FREAKHEAD says:

    Here’s a great interview on NPR I heard earlier in the week with Herb Allison (Former Assistant Secretary of the Treasury for Financial Stability) who served under Bush and Obama:

    http://www.npr.org/templates/story/story.php?storyId=130356659

  10. captadam says:

    But it’s a confusing topic, and we’re Americans, and it is easier to react to a nebulous concept than try to understand. So, TARP BAD. RAWWAWWWRRR.

  11. Im Just Saying says:

    I don’t understand the confusion: If I spend $5 on an investment, the cost was $5. If I later sell it for $10, I made $5. We’re talking about upfront costs and potential returns here.

  12. RxDude says:

    I’m sure this has nothing to do with protecting the current status quo during an election year with unusually high anti-incumbernt sentiment.

    • Costner says:

      Hard to say – but considering it was originally Bush’s idea, it isn’t like Obama can take sole credit for it. Most of those who supported it originally are now trying to distance themselves from it, but no matter who you ask TARP has cost us much, much less than originally estimated.

      And yes – most economists agree it was necessary. There are a lot of complaints within these comments about how much it cost and people who would have preferred we did nothing, but when pretty much every major economist says inaction would have resulted in total economic collapse… I’m tempted to believe them. If TARP results in the recession being not quite as deep or not quite as long, it will pay off exponentially.

      Besides – it cost about 1/7th of what Iraq cost us… and what return on our investment did that bring us??

  13. Duke_Newcombe-Making children and adults as fat as pigs says:

    In first with “Rabble, rabble, Oh-bahmahz, rabble, SOCIALISM!!!111ELEVENZ Our free-dumz, rabble, rabble rabble.”

  14. Extended-Warranty says:

    I love the commenters finding ways to complain about this. Somehow we’d be in a better position now if companies like Citi and AIG went completely under…. Stay smart America!

  15. J Lo says:

    Does Timmy really take us all for morons?

    If the banks are really okay, why don’t we reinstate mark to market? Why don’t end support of the housing market through the GSEs? No one with a brain trusts the balance sheets of banks. There’s a reason why Basel is giving banks 8 YEARS to comply with new capital requirements.

    The true costs have only yet to be realized:

    http://money.cnn.com/news/storysupplement/economy/bailouttracker/ shows the amount of money that has been deployed in the numerous programs designed the save the butts of bankers.

    I’m not impressed that TARP only lost $50 billion, when we’re on the hook for the trillions of other program costs that have yet to come home to roost, along with the massive distortion of the economy caused by the Fed.

  16. TasteyCat says:

    I don’t have a problem with TARP. It produced tangible results. The stimulus program, on the other hand…

    • Gulliver says:

      Well the proof that stimulus worked is iin this months job report:
      “The main surprise in the report was a 76,000 fall in local government jobs. It suggests that the effects of last year’s $787bn fiscal stimulus are starting to fade.

      The private sector created a modest 64,000 jobs, most of them in services, well below the 300,000-400,000 a month needed to keep up with population growth and tackle rapidly the 9.6 per cent unemployment rate.”

      What people seem to forget, is a lost government job is EXACTLY equal to a lost private sector job. If the government balanced the budget tomorrow, guess what unemployment would be?

      The fact is, when you layoff teachers, firefighters, police, garbage men, etc, those people are now unemployed. They spend less at places like the grocery store, the local gas station, restaurants, clothing stores, buying cars, or electronics. So now those private businesses have no need to hire more people, instead they stick with what they have.

  17. Wang_Chung_Tonight says:

    wow gieger-counter. good job.

    only 50 billion.

    I have seen NOTHING of the effects of that. and don’t give me that ‘collateral’ crap.

    scratch the back of your bank friends and raep us-that’s all you did.

    • Gulliver says:

      Yes, because YOU can not see it, it means it is not so. Who should I believe, people with doctorate degrees in economics who have spent their lives working on these things, or some guy on a blog named Wang Chung Tonight? I’ll put my trust in those who do this for a living. When I want advice about one hit wonders, I will go to Wang Chung.

  18. jomiku says:

    A return not figured in is related to jobs. For example, they count the cost of putting money into GM and Chrysler but they don’t count the taxes paid by the workers who would have lost their jobs, nor the amount of money they spend in the local economy, nor the jobs that this spending creates. They also don’t count the cost to the various states – and federal – government of more unemployment payments and various social payments like food stamps.

  19. Abradax says:

    We all know how good Geithner is at tax issues.

  20. blakek says:

    TARP was only a very small fraction of the bailouts, but most people use it as a synonym for them. TARP went fairly well because of the other (much larger) bailouts. Kind of like if I loan you $50, and you have no way to repay it, but my wife is bugging me to collect it (assuming I’m lucky enough to be married to Elizabeth Warren) so I loan you $200 so you can pay me back my $50. I did get my $50 loan repaid, but that’s not a particularly insightful synopsis.

  21. INsano says:

    The good news is, with the Fed printing money like there’s no tomorrow, inflation means it’ll end up costing us a lot less than it would have initially!

  22. thebaron says:

    Only 50 billion to save their buddies? What a @#$@# deal!

  23. DragonThermo says:

    This too stinks of Enron-style account book-cooking.