TARP Program ROI Not So Hot for Taxpayers

by Darwin on January 17, 2009

According to the blog from the Director of the Congressional Budget Office, the return on investment to taxpayers for the TARP program is not so good.  In a roundabout way, he shared some insight into what the actual ROI is as of now:

…CBO estimates that the net cost of the TARP’s transactions (broadly speaking, the difference between what the Treasury paid for the investments or lent to the firms and the market value of those transactions) amounts to $64 billion—that is, measured in 2008 dollars, we expect the government to recover about three quarters of its initial investment…

Well, that’s a roundabout way of simply stating that the TARP program has lost 25% for US taxpayers during the period.  Compare this loss with the 4% loss incurred by the the S&P500 since TARP became law on October 3, 2008. 

So far, this is how the funds have been disbursed according to the latest tally on wikipedia:

For the first half of the total $700 billion was allocated for shoring up financial institutions:

  • sent checks totaling $168 billion in varying amounts to 116 banks;
  • committed another $82 billion to capitalize more banks;
  • bought $40 billion in preferred shares of AIG so the troubled insurer could pay off an earlier loan from the Federal Reserve;
  • committed $20 billion to back any losses that the Federal Reserve Bank of New York might incur under the Term Asset-Backed Securities Loan Facility;
  • committed to invest $20 billion in Citigroup on top of $25 billion the bank had already received;
  • committed $5 billion as a loan loss backstop to Citigroup;
  • agreed to loan $13.4 billion to GM and Chrysler to get them through the next few months.

So, what are your thoughts? 

Are the American Taxpayers going to even come close to breaking even on this?

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1 Allen Taylor January 17, 2009 at 4:31 pm

Nice writing. You are on my RSS reader now so I can read more from you down the road.

Allen Taylor

2 ND @ French Gold Coins January 18, 2009 at 4:14 pm

No, the taxpayers are going to lose their shirts on this one. I don’t understand how mortgaging the future of our children/grandchildren to save a few jobs today is a good idea.

Site looks great, btw! very clean, crisp look.

3 Darwin January 18, 2009 at 4:41 pm

All this bailout business is truly disturbing. We are creating vampire organizations that aren’t sustainable but will continue to suck funds out of the tax base for years to come. GM will be back for more in the spring and the new administration is gearing up for the next large stimulus package. Now, all homeowners who AREN’T having trouble making their payments are saying, “where’s my entitlement?”. It’s really a mess.

Thanks for the compliment by the way. I’m glad I finally made the switch from Blogger to WordPress. I hope all the efforts and bewilderment with a new platform were worth it!

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