What does a TARP cost these days?

[Tilted]

Leaving aside for now comments about the propriety of having done TARP to begin with, I thought I'd report the latest estimates for the ultimate cost to the Treasury (read: taxpayers) of the various TARP programs. We're pretty far along now and most of these estimates will likely turn out to be fairly accurate - give or take $10 Billion or so.


CPP, TIP, AGP and CDCI (i.e. the bank bailouts): $20.50 Billion profit

PPIP, TALF, & SBA (i.e. the credit market bailouts - these are the kinds of programs that TARP was initially sold as being, but they turned out to be a relatively small part of what TARP was used for): $2.86 Billion profit

AIG bailout: $11.48 Billion loss

AIFP (i.e. the auto bailouts, to include GM, Chrysler, GMAC, Chrysler FinCo, and GM and Chrysler suppliers): $23.60 Billion loss

MHA/HAMP & HHF (i.e. the homeowner bailouts): $45.60 Billion loss

Total: $57.33 Billion loss


As can be seen, the monetary cost of TARP comes from (1) the AIG mess, (2) the auto bailouts (read: union / Fiat bailouts, as that's who benefited primarily - the auto companies weren't saved, they had to go through bankruptcy just as they otherwise would have, and the company's owners, not to mention many of their other creditors, certainly weren't helped), and (3) the assistance to homeowners. The bank bailouts as a whole didn't end up costing us money, though we will certainly lose money on some individual bank bailouts. The large profits derived, in general, from the big bank assistance more than offset the smaller losses derived, in general, from the small bank assistance.

 

[EmptyTimCup]

:shrug:


so where is the Profits, are they being used to pay down the debt ?

 

[jackers]

Which of our Conservative candidates supported TARP?

 

[Lurk]

:shrug:


so where is the Profits, are they being used to pay down the debt ?

No, Obama sees that as 'his' money to redistribute. That's how he makes house payments and puts gas in the automobiles of those folks in the ghetto.

 

[Tilted]

:shrug:


so where is the Profits, are they being used to pay down the debt ?

There likely won't be any overall profits. The profits from the bank bailouts just serve to reduce the losses from the homeowner's programs and the AIG and auto bailouts.

That said, our budget realities being what they are (i.e. we continue to operate in deficit overall), if there were any profits from this or any other government programs they would functionally serve to reduce the amount of ongoing borrowing we need to do in order to spend the money we've decided to spend. So, they wouldn't pay down the debt so much as they would slow the growth there of to whatever extent they existed.

 

[Tilted]

Which of our Conservative candidates supported TARP?

Being honest? At the very least, whichever ones thought they needed to in order to make sure it passed. On the other side of the consideration, most of those that opposed it are ones that thought they could safely do so as it would pass anyway - except perhaps for Mr. Paul. He's the only one that I'm willing to give credit for possibly having been willing to vote against it even if he'd have thought his doing so would cause it to ultimately fail, and even realizing what the consequences would likely have been.

 

[EmptyTimCup]

So, they wouldn't pay down the debt so much as they would slow the growth there of to whatever extent they existed.

I am a simple in and out guy ....... we shelled out, what 780 Billion of TARP ....


*poof* gone, borrowed and spent ...... now some banks are paying money back ..... where is THAT money going


I HOPE to pay back the money already borrowed, not spent again on some Progressive Vote buying scheme - aka more stimulus

 

[Larry Gude]

Which of our Conservative candidates supported TARP?

The what?

 

[Larry Gude]

Leaving aside for now comments about the propriety of having done TARP to begin with..

"...other than that, Mrs. Lincoln, how was the play?"

 

[Tilted]

I am a simple in and out guy ....... we shelled out, what 780 Billion of TARP ....


*poof* gone, borrowed and spent ...... now some banks are paying money back ..... where is THAT money going


I HOPE to pay back the money already borrowed, not spent again on some Progressive Vote buying scheme - aka more stimulus

We didn't shell out anywhere near that amount, less than half that if my (admittedly declining) memory serves me well enough in this case. There's a difference between the spending authority provided by the TARP legislation and what was actually (and I suppose, could still be) spent / paid out.

As for where that money is going, just like most incoming money it goes into our accounts. It becomes part of the money that we use to pay our bills, for whatever they may be. The effect is that we have more money in our accounts and thus have to borrow less in order to be able to pay out whatever we have to pay out. The other option would be to immediately use it to pay off specific outstanding debt (which isn't really feasible anyway due to the structure of our borrowing) and then turn around and have to borrow more (more) money to pay the bills we would otherwise have used those funds for. The effect is the same.

When you are operating in deficit, you aren't net paying down your overall debt. Extra funds just serve to reduce the amount by which you are operating in deficit - they reduce the amount of money you need to borrow and thus the overall amount of debt you'll have going forward, even though they don't actually reduce the amount of debt to below where it is today.

The real answer to your original question is that this money coming back in is effectively paying down the debt, just as sending it out meant increasing that debt. However, since we are still operating in deficit, the overall amount of that debt continues to go up regardless.

 

[Tilted]

"...other than that, Mrs. Lincoln, how was the play?"

Even still: The direct and immediate monetary effects of undesirable decisions or occurrences are often worthy of discussion, even if the principle of the matters were of much more importance when it came to trying to avoid those decisions or occurrences. That may be true even if it is only to dispel misperceptions and inaccurate information by which some seek to advance policy arguments going forward.

 

[philibusters]

I am oversimplifying it, but to me TARP, not Obama's stimulus was what prevented us from going into a Great Depression and as such, will go down in history as the one of Bush's best decisions as President.

 

[Larry Gude]

Even still: The direct and immediate monetary effects of undesirable decisions or occurrences are often worthy of discussion, even if the principle of the matters were of much more importance when it came to trying to avoid those decisions or occurrences. That may be true even if it is only to dispel misperceptions and inaccurate information by which some seek to advance policy arguments going forward.

Absolutely.

Nothing makes my point about TARP being THE catastrophically bad decision of our age more than the economy today. TARP was done to avoid dealing with housing and energy, THE two drivers of the decline. And, it worked.Magnificently. Today, we STILL avoid those two issues like the plague and, instead, talk of vague generalities like 'jobs'.

I am for revisiting TARP on a regular basis.

 

[philibusters]

Absolutely.

Nothing makes my point about TARP being THE catastrophically bad decision of our age more than the economy today. TARP was done to avoid dealing with housing and energy, THE two drivers of the decline. And, it worked.Magnificently. Today, we STILL avoid those two issues like the plague and, instead, talk of vague generalities like 'jobs'.

I am for revisiting TARP on a regular basis.

To me TARP was done to sure up the housing market market and was only incidentally related to Energy. What do you mean that TARP was done to avoid dealing with housing and energy?

 

[EmptyTimCup]

I am oversimplifying it, but to me TARP, not Obama's stimulus was what prevented us from going into a Great Depression and as such, will go down in history as the one of Bush's best decisions as President.

Sorry NO, Sir

it is a well know FACT - the NEW Deal extended the depression by several years, and the only thing that got the US out was massive Military Spending in WW II

I would not call the UCLA a bastion if Conservatism;

FDR's policies prolonged Depression by 7 years, UCLA economists calculate

that was the 1st thing my Google search turned up

 

[Larry Gude]

I am oversimplifying it, but to me TARP, not Obama's stimulus was what prevented us from going into a Great Depression and as such, will go down in history as the one of Bush's best decisions as President.

How? No TARP, the banks are forced to deal with their balance sheets and the need to start figuring out how to avoid their own demise and, to that end, they figure out how to fix the problem.

TARP, we're still not dealing with it. Things would have gotten bad, real bad without TARP but, the problem would have been fixed by now and, in my view, we'd be on the mend. I actually think spring of '09 would have already started a rebound. TARP did NOTHING but kick the can down the road, allowing things to not only get worse but, become even more difficult to fix.

:shrug:

 

[Larry Gude]

Sorry NO, Sir

it is a well know FACT - the NEW Deal extended the depression by several years, and the only thing that got the US out was massive Military Spending in WW II

I would not call the UCLA a bastion if Conservatism;

FDR's policies prolonged Depression by 7 years, UCLA economists calculate

that was the 1st thing my Google search turned up

Yup.


FDR's New Deal economic recovery plan; WWII.

400,000 dead Americans, millions crippled and a bigger monster replaces the existing bogeyman.

 

[Larry Gude]

To me TARP was done to sure up the housing market market and was only incidentally related to Energy. What do you mean that TARP was done to avoid dealing with housing and energy?

Energy was used as the place to put big money to hold the value of dollars. Had oil not been there then all those dollars would have looked for another safe harbor;

Real estate.

 

[philibusters]

How? No TARP, the banks are forced to deal with their balance sheets and the need to start figuring out how to avoid their own demise and, to that end, they figure out how to fix the problem.

If push comes to shove I must admit that I only have a hazy knowledge of the policy issues that TARP dealt with. Lets think of a hypothetical world in which President Bush and Congress does not pass TARP or a similar measure. What would have happened?

It is here that my lack of knowledge comes into play. I really don't know what would have realistically happened. Hence I cannot make any definite conclusions. My guess is though that you and I are envisioning different scenarios of what would have happened. I imagining a world where some major banks fail and the banks that do make it out are really careful about lending money and we go into a great depression. You are imagining a world where banks have to losses and maybe their investors are upset that there will not be any dividends and the price of the stock went down, but where there are no long term devastating impact on our national economy.

TARP, we're still not dealing with it. Things would have gotten bad, real bad without TARP but, the problem would have been fixed by now and, in my view, we'd be on the mend. I actually think spring of '09 would have already started a rebound. TARP did NOTHING but kick the can down the road, allowing things to not only get worse but, become even more difficult to fix.

:shrug:

Simply put if your assessment about recovery and being on the mend is correct, then TARP certainly was a terrible policy. However, I see it differently. With some banks going under there is less liquidity as a whole in the banking system. Having seen their brethen go down and everybody lose their job the survivors are really careful who they lend money to. This causes the certain markets to fall way way worse than they did, markets like the housing market and car market.

Think of this a house in some midwestern city that is the same size and on the same amount of property and that has just as good of a location relative to the city may be worth 1/4th as much as the same house in NYC. Why--because of the free market, that is what people are willing to pay. Without credit the value of houses plummet. Think of a modest home priced at $150,000. Honestly how many middle class families have $150,000 in the bank to buy a house. If they do it would wipe out a good chunk of their savings to have to pay the money upfront. Which they would have to without banks. Hence the housing market would slump majorly.

Likewise people would be less likely to buy cars if they had to $30,000 out of their bank account immediately to pay for the car. In fact all retail would suffer.

This would cause a loss of jobs. With more poeple out of jobs there is less people producing and the GDP goes down.

I think that is a Great Depression. One of the other differences between a recession and a depression to me is that recessions tend to correct themselves, depressions don't.

Imagine two men with a family. One of them slacks at his job and gets fired. The other is an alcoholic with impulsive desires for alcohol and that gets him fired. The first man will probably find a new job and work harder because he knows he has to. The second man may never recover as losing his job will just cause him to drink more and he very well may be dead within a few year as he goes down that road. The first man is analogous to a recession. The second man is analogous to a depression.

If banks truly suffered like they might have and like I am assuming they would have (again I admit I don't know how accurate these assumptions are) then there is no way we would already be in recovery now. Things would be getting worse. We'd probably be a generation away from the start of a recovery or a world war away from a recovery and both of those scenarios are horrible.

Maybe the truth lies somewhere between are scenarios. Your scenario is very optimistic, the banks are on the rebound with one year of September 2008. My scenario sees a huge economic depression where we don't start an upward swing for 20 to 30 years and we don't get back to where we were in 2008 for another 100 years.

 

[Tilted]

I am oversimplifying it, but to me TARP, not Obama's stimulus was what prevented us from going into a Great Depression and as such, will go down in history as the one of Bush's best decisions as President.

I think that's about right, but I oppose TARP and think it was improper public policy even still. Would the absence of TARP, and anything substantially like it, have lead to a Great Depression or just a shortish period of societal chaos and widespread pitchfork raising an order of magnitude greater than what we've seen over the last few years (and possibly followed fairly quickly by the beginning of a slow grind toward recovery from the economic devastation that would have been allowed to happen - i.e., toward the kind of economic normalcy that we stubbornly continue to resist as a matter of public policy goals and expectations)? I think that remains a fair question.

Unfortunately for President Bush and others who supported TARP, the cynics are free to deny the economic devastation that would have resulted in a no-TARP world because such a world wasn't allowed to be. And given the general lack of intellectual honesty in society, and the general desire to blame someone else (preferably someone identifiable) for whatever ails us, deny that would-have-been devastation is precisely what many people choose to do. Some of those people will be among those that write the history books. So, I don't know what those history books will have to say about TARP in general, though I do feel confident about what they should, in general, say about it.

TARP was bad public policy. I wish it hadn't been done because, in political regards, im focused on the big picture and long term good of society. However, I think the majority of those that now criticize it (i.e. that are free to do so largely because it was done) would have been much more up in arms about it not having been done had it not been. If it had not been, and assuming its supporters had been able to effectively communicate through the noise of mob outrage that would likely have resulted, the political careers of its opponents would have been, for the most part, over.

Like TARP or not, our financial system - which looked to be on the brink of total collapse - was, for the most part, saved. That reality had profound, immediate, and far reaching consequences, even if those consequences amounted mostly to things not happening - things which most people didn't recognize as being real likelihoods, or even possibilities, anyway. Further, John Q. and Jane Q. Citizen are among those that were saved, indeed the most important among the saved. And that's true whether or not they would have been among those to blame had salvation not been forthcoming. Their innocence would not have protected them from the pain had our financial system been allowed to collapse.