Report on the Troubled Asset Relief Program—July 2021
Report
Congress created the Troubled Asset Relief Program (TARP) in 2008 to stabilize financial markets. CBO estimates that the TARP’s net cost will be $31 billion—about what it reported in March 2020 and $1 billion lower than OMB’s latest estimate.
In October 2008, the Emergency Economic Stabilization Act of 2008 (division A of Public Law 110-343) established the Troubled Asset Relief Program (TARP) to enable the Department of the Treasury to promote stability in financial markets through the purchase and guarantee of “troubled assets.” Section 202 of that legislation, as amended, requires annual reports from the Office of Management and Budget (OMB) on the costs of the program. The law also requires the Congressional Budget Office to submit its own report within 45 days of the issuance of OMB’s report each year. CBO’s assessment must discuss three elements:
The costs of purchases and guarantees of troubled assets,
Information CBO collects and the valuation methods it uses to calculate those costs, and
The program’s effects on the federal budget deficit and debt.
To fulfill that requirement, CBO has prepared this report on TARP transactions completed, outstanding, or anticipated as of April 30, 2021. By CBO’s estimate, $444 billion of the $700 billion initially authorized will be disbursed through the TARP, including $0.4 billion in projected future disbursements. (About $410 billion of the total amount was disbursed by March 2011.) CBO estimates that the government’s total subsidy costs—including those already realized and those stemming from outstanding and anticipated transactions—will be $31 billion.
The estimated cost of the TARP stems largely from ongoing grant programs aimed at preventing foreclosures on home mortgages, assistance to American International Group (AIG), and aid to the automotive industry. Taken together, other transactions with financial institutions have yielded a net gain to the federal government from dividends, interest, and capital gains.
CBO’s assessment of the TARP’s costs is about the same as what the agency last reported in March 2020. CBO’s current estimate is $1 billion lower than OMB’s latest estimate of $32 billion because CBO projects a slightly lower cost for mortgage programs.
The U.S. financial system was in a precarious condition when the TARP was created, and the transactions envisioned and ultimately undertaken entailed substantial financial risk for the federal government. Nevertheless, the TARP’s net realized costs have proven to be near the low end of the range of possible outcomes anticipated at the program’s outset.
