The Troubled Asset Relief Program: Report on Transactions Through December 31, 2008

This is the first of CBO’s statutory reports on the TARP’s transactions. Through December 31, 2008, those trans-actions totaled $247 billion. Valuing those assets using procedures similar to those specified in the Federal Credit Reform Act (FCRA), but adjusting for market risk as specified in the EESA, CBO estimates that the subsidy cost of those transactions (broadly speaking, the differ ence between what the Treasury paid for the investments or lent to the firms and the market value of those transactions) amounts to $64 billion.


Category: BP Cafe, Markets, Taxes and Policy

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17 Responses to “CBO Report on TARP”

  1. DL says:

    If it’s really true that the assets are “worth” only $64B less than what they paid, then why not just sell the assets to the private sector, and take the loss?

  2. ByteMe says:

    So a 25% loss. So far.

  3. DL says:

    Interesting how there was virtually no public debate on the specifics of TARP II. No press conference from Obama explaining how he might want to spend the money.


  4. Lunch Meat says:

    I have confidence in the O-man. these crooks , not so much.

  5. Mannwich says:

    @DL: I may be wrong, but I think we’ll see O (unlike W) fully explain things once he’s sworn into office. Call me naive but I really do think we’ll get far more explanation/information/accountability from O than we did Bush, who rarely explained what he was doing to the American public.

    Let’s let the man have his day tomorrow, be officially sworn in, and then we can start lobbing criticisms at him. It’s not his job yet. It will be starting tomorrow.

  6. ben22 says:

    Lunch Meat,

    Let’s hope you are correct.

    Maybe check out the last faber report at gloomboomdoom, the uh, picks from Obama thus far, aren’t exactly new faces….

  7. 10 cc says:

    Yeah…saw this earlier today at the FT. They quoted Felix Salmon…

    “I look forward to Treasury telling us, before it spends any more TARP funds, what kind of subsidy rate it considers acceptable. There’s a total of $453 billion in TARP funds not spent in 2008; if those too have a subsidy rate of 26%, that’s equivalent to government expenditure of another $118 billion. To put that number in perspective, the market capitalization of Citigroup and Bank of America combined is just $55 billion. Isn’t it about time we just nationalized them?”

  8. Blissex says:

    Note that the 26% loss is calculated according to prudential rules from legislation enacted in the good times, that is in an ordinary market.

    Surely not in the current market. That’s the loss if those “assets” were sold in say 1998, not in 2008. Assessing the value of Imperial Russian bonds in the market of 1918 is not necessarily assessable in the same as in the market of 1898.

    In other words 26% is a bit optimistic.

    How optimistic? Well it depends on whether you see the 2008-2010 depression as a cyclical or a secular event, and for whom. The 1930-1932 depression was cyclical in the USA and secular in the UK for example.

    The big question as always is about oil, which has greatly increased primary and secondary industry productivity in the USA in the past 70 years, subsidizing a large and largely parasitical (think Easter Island moai) tertiary sector.

  9. @10cc…

    “Isn’t it about time we just nationalized them?”

    exactly what Krugman says in a NYT article today:

    He discusses the latest economic policy of the day being floated by Paulson and Bair–a bad bank to hold bad assets–but ends by discussing the eminent nationalization of the banks. Author Leavitt says the same thing on a Bloomberg interview.

    Now, how many folks out there actually believe that the TARP has only lost $64b? If there are no buyers (except the government) for an “asset” is it really an asset at all? Sounds more like some Detroit real estate to me.

  10. Mannwich says:

    Nationalization of the banks is coming. They’re just going to do every other wrong thing before the inevitable occurs. It’s already happening, however slowly and inefficiently………

    They’ll make it official before the end of Q1.

  11. Bruce in Tn says:

    I look back on a simpler time. Does anyone out there recall the commercial about the clueless middle-aged man who lived in a big house, and one of the scenes in the commercial had him driving his riding mower over an immaculate lawn…he said something like,”I am up to my eyeballs in debt, won’t somebody out there help me please.”

    …can you imagine why that thing hasn’t been seen for some time??

  12. 10 cc says:


    Thanks for the link.
    Seems to me though, he’s more worried that nationalization might not be so “eminent” (or should that be iminent).

    He does point out something important…

    “A better approach would be to do what the government did with zombie savings and loans at the end of the 1980s: it seized the defunct banks, cleaning out the shareholders. Then it transferred their bad assets to a special institution, the Resolution Trust Corporation; paid off enough of the banks’ debts to make them solvent; and sold the fixed-up banks to new owners.

    Instead, they’re reportedly gravitating toward a compromise approach: moving toxic waste from private banks’ balance sheets to a publicly owned “bad bank” or “aggregator bank” that would resemble the Resolution Trust Corporation, but without seizing the banks first.”
    (italics mine)

    That, of course, would be a massive gift to current management and shareholders at taxpayer expense.

    So where was all this deathly fear of “Socialism” and Nationalization in the late eighties? What’s different this time?

  13. AmenRa says:

    @Bruce in Tn
    I remember that commercial. LOL. How about the Barron’s commercial (with net worth of $3.2 million)? Shouldn’t the new net worth be about $1.6 million?

  14. KidDynamite says:

    the especially sick parts of this report are a) how much of the auto loans have ALREADY been written off – we are talking less than 3 weeks since the loans were made… and b) how much of the AIG subsidy has been written off.

    this report MUST be thrown in the face of any politician who uses the phrase “loan” or “investment.”

    these are subsidies/bailouts, pure and simple.

  15. pmorrisonfl says:

    Mannwich writes: “They’re just going to do every other wrong thing before the inevitable occurs. ”
    I’m reminded of the Winston Churchill quote about how “the Americans will always do the right thing… after they have exhausted all of the alternatives.”

    Isn’t the Fed already a ‘bad bank’ with the expansion of its balance sheet, and the drop in Treasuries held?

  16. bemused says:

    So now that ‘zombie banks’ has become the latest overused phrase in discussions of the financial crises, isn’t it time to face the truth and say, STOP the nonsese? It’s time to capitalize a new bank or two with a few trillion in taxpayer money to start lending to businesses and consumers in need and with a reasonable probability of repaying at a reasonable interest rate, and let the rest of the banks file for bankruptcy protection and clear the air?

  17. bemused says:

    Can anyone explain why, if the bad loans have been ‘written off,’ the debtors –homeowners, carowners, etc.– have not been officially informed and formally relieved of their debt?