The incredibly shrinking bill for TARP
The watchdog for the Troubled Asset Relief Program, SIGTARP, has issued its latest report on the program. The two big takeaways: TARP’s support for the market is expected to last until 2017, and taxpayers are still owed $133 billion from the $475 billion bailout.
The stagnant economy is expected to slow down the pace of TARP repayments—which have totaled $278 billion so far—but the Congressional Budget Office ultimately expects the cost of TARP to taxpayers to be $34 billion.
The CBO’s latest figure is higher than its previous $19 billion price tag for TARP, due to increased estimates for the cost of bailing out AIG and General Motors. But it’s still significantly lower than previous estimates for the ultimate cost of the bailout to taxpayers. Originally, TARP was supposed to cost $700 billion, with one Brookings analyst estimating that it could cost taxpayers as much as $300 billion in the end. Dodd-Frank reduced the scope of TARP to $475 billion. Less than two years ago, the Treasury Department estimated that TARP would cost taxpayers $89 billion. Last year, the Office of Budget Management pegged the cost at $53 billion. But firms have been better at repaying TARP funds than officials previously expected—which Yahoo’s Daniel Gross is dutifully tracking here—which has reduced the projected cost of the bailout in the long run.
That’s not to say that the shrinking bill for TARP is all good news. Part of the reason that the estimates have fallen is because a TARP-funded program to help homeowners--the Home Affordable Modification Program--has failed to meet expectations. SIGTARP points out that only 6.6 percent of the $45.6 billion in TARP funds set aside for the program has been spent so far. Originally, the Obama administration projected that housing program would help some 3 million to 4 million borrowers with their mortgage payments, but only about 762,839 homeowners have received permanent modifications to their mortgages as a result.
The bailout money linked to the Home Affordable Modification Program hasn’t been spent partly because private firms that have refused to cooperate with the program or have tried to scam potential participants. SIGTARP notes that Treasury has finally decided to withhold incentives for JPMorgan to participate in the program because of a “continued refusal to comply with program requirements.” There’s also widespread evidence that the private mortgage servicers involved with the program have mishandled loans, under weak supervision from the government. So far, SIGTARP investigations “have resulted in criminal charges against 17 individuals” who’ve tried to swindle homeowners wanting to participate in the Home Affordable Modification Program, the report notes.