What was that about the TARP protecting the taxpayer and possibly earning a big profit down the road? Well it’s off to a crappy start. The Congressional Budget Office is out with a new study, which says we’re already down $64 billion on our “investments”.
CBO director’s blog: Through December 31, 2008, the Treasury disbursed $247 billion to acquire assets under that program. CBO valued those assets using discounted present-value calculations similar to those generally applied to federal loans and loan guarantees, but adjusting for market risk as specified in the legislation that established the TARP. On that basis, 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.
Loss aside, this doesn’t tell you much about how well the TARP has done. The idea of it as a fund that could show a return has always been dangerous nonsense. The point of it was to save the banking sector… though it hasn’t done well at that either.