TARP’s Price Tag: $109 Billion

The Congressional Budget Office has determined that the Troubled Asset Relief Program (TARP) will cost the government $109 billion – just 16 percent of the $700 billion set aside to rescue the nation from the great recession.  Insurance giant AIG and the auto industry are TARP’s largest beneficiaries.

The federal government bought $40 billion in AIG preferred stock and created a $30 billion line of credit for the firm.  Earlier CBO estimates that AIG would cost the government $9 billion; since AIG hasn’t paid the Treasury Department the quarterly dividend it owes, the CBO increased its projected loss to $36 billion or more than half of the bailout cost.  The CBO estimates that TARP will lose $34 billion from its bailout of Chrysler and General Motors.

TARP’s mortgage modification program is estimated to use less than $20 billion, less than half of the $50 billion set aside to help people stay in their homes.  The CBO says that fewer people will participate in the program than anticipated.  When President Barack Obama announced the program in February of 2009, he said that as many as four million homeowners could reduce their monthly payments to no more than 31 percent of their pre-tax incomes.  At the end of February, only 170,000 distressed homeowners had taken advantage of the mortgage modification program.