TARP to Cost Taxpayers $61 Billion This Year

Tuesday, January 31st, 2012 and is filed under Blog

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Remember all those promises from TARP supporters that the bailouts have ended?  Officials in the Obama administration have even suggested that we will begin to turn a profit on TARP.  Well, according to the CBO report released today, taxpayers are on the hook for another $61 billion in TARP expenditures this year.  This from the Wall Street Journal:

The federal government will spend roughly $61 billion more in fiscal 2012 than it did in fiscal 2011 on its continuing emergency rescue fund instituted at the height of the 2008 financial crisis, the nonpartisan Congressional Budget Office said.

The CBO said the government would record outgoings of $23 billion in fiscal 2012 on the Troubled Asset Relief Program, as compared to $37 billion in savings it booked in fiscal 2011.

And where will the biggest expenses come from?

This is largely due to declines in share prices of two companies in which the government still holds substantial shares: American International Group Inc. and General Motors Co.

The two were among dozens of firms that received hefty bailouts from the federal government at the end of 2008 or early 2009.

Between them, the Treasury and New York branch of the Federal Reserve still control a 77% stake in AIG. The firm received a total of $184 billion in loans and guarantees from the Treasury and Fed as it stood on the brink of collapse in 2008.

The federal government owns a 32% stake in GM, after having helped the car maker through a managed bankruptcy. The company emerged from bankruptcy protection in June 2009, much sooner than expected, and had been on track to pay off the federal government sooner than anticipated. However, its shares have struggled over the 12 months.

So indeed the bailouts did not work as well as Obama has suggested.  Here is what Obama said in the State of the Union Address:

On the day I took office, our auto industry was on the verge of collapse. Some even said we should let it die. With a million jobs at stake, I refused to let that happen. In exchange for help, we demanded responsibility. We got workers and automakers to settle their differences. We got the industry to retool and restructure. Today, General Motors is back on top as the world’s number one automaker. Chrysler has grown faster in the U.S. than any major car company. Ford is investing billions in U.S. plants and factories. And together, the entire industry added nearly 160,000 jobs.

Obama owes taxpayers an answer to this question: if Government Motors is doing so well, while we they require billions more in bailout money two years after emerging from bankruptcy?