Taxpayers still owed $133 billion in TARP money
Back when the Congress was taking up the Emergency Economic Stabilization Act, which created the Trouble Assets Relief Program (TARP), as financial markets were taking a tumble, many free marketers warned that taxpayers would lose billions. Many members of Congress tried to play down the losses or said that taxpayers would even profit.
If only that were the case. However, the watchdog that oversees the TARP program says that taxpayers are still owed nearly $133 billion:
A government watchdog says U.S. taxpayers are still owed $132.9 billion that companies haven’t repaid from the financial bailout, and some of that will never be recovered.
The bailout launched at the height of the financial crisis in September 2008 will continue to exist for years, says a report issued Thursday by Christy Romero, the acting special inspector general for the $700 billion bailout. Some bailout programs, such as the effort to help homeowners avoid foreclosure by reducing mortgage payments, will last as late as 2017, costing the government an additional $51 billion or so.
The gyrating stock market has slowed the Treasury Department’s efforts to sell off its stakes in 458 bailed-out companies, the report says. They include insurer American International Group Inc. (AIG), General Motors Co. (GM) and Ally Financial Inc.
It will also be challenging for the government to get out of the 458 companies as the market remains volatile and banks struggle keep afloat in the tough economy, it says.
Congress authorized $700 billion for the bailout of financial companies and automakers, and $413.4 billion was paid out. So far the government has recovered about $318 billion. The bailout is called the Troubled Asset Relief Program, or TARP.
The losses were pegged at $109 billion just two years ago. This estimate includes the $23.7 billion that the Obama Administration has lost through its bailout of Chrysler and Government Motors General Motors.
Back in 2010, Andrew Moylan of the National Taxpayers Union shotdown claims of a profit from the bailouts, noting that it was a “myth” and that the ledgers were made to look better than they really were “because the banks that got bailed out through TARP shuffled all of their bad assets over to Fannie Mae and Freddie Mac, which got their own separate bailout.”
The merits of TARP will no doubt be debated for years to come. Personally, I opposed it because of the precedent that was being set and because I believe that companies that make bad decisions, no matter how large they are, should fail. Like Dan Mitchell has so rightly said, “Capitalism without bankruptcy is like religion without Hell.”