Price tag of TARP bailout: $109 billion

By Annalyn Censky, staff reporter


NEW YORK (CNNMoney.com) -- The government's unprecedented $700 billion economic bailout will actually cost taxpayers just 16% of that total, according to a Congressional Budget Office report released Wednesday.

The Treasury's losses on the Troubled Asset Relief Program (TARP) will total $109 billion over the program's lifetime, CBO latest estimates show. That's up $10 billion from the agency's last projection, released in January.

CBO, which is charged with reviewing congressional budgets, has released a series of TARP cost calculations in the 17 months since the bailout began, each time updating its numbers with the latest data. At one point CBO expected the cost to be as high as $356 billion, but faster-than-expected bank repayments and other cost adjustments have drastically reduced the expected price tag.

TARP's two big moneysuckers are AIG and the auto industry.

AIG got TARP money in two forms: the government bought $40 billion in preferred stock and created a $30 billion line of credit for the company. CBO previously estimated the AIG bailout would cost the government $9 billion, but AIG hasn't paid the Treasury the quarterly dividends it owes. AIG's weak financial position prompted CBO to increase its loss projection to $36 billion -- more than half of the AIG bailout cost.

Other major losses -- a total of $34 billion -- will come from TARP assistance to the automotive industry, CBO said. The government committed $85 billion to bailing out the automakers.

On the flip slide, the highly unpopular capital infusion for banks will actually net the government $7 billion, CBO expects -- even including a $2 billion loss from CIT Group (CIT, Fortune 500), which declared bankruptcy, and Pacific Coast National Bancorp, which was taken over by the Federal Deposit Insurance Corporation.

CBO isn't the only agency attempting to tally up TARP's cost. The latest estimates from the Office of Management and Budget, released in early February, predict TARP will cost $18 billion more than CBO's estimates. The numbers from the two agencies differ because of different assumptions about the cost of some items and a varied timeframe for some of the data they evaluated.

Foreclosure help forecast

As for President Obama's mortgage modification program, the CBO estimates that the Treasury Department will use no more than $20 billion of TARP funds, less than half of the $50 billion originally allocated. That's because the CBO expects many fewer people will participate in the program than the government originally expected, a view held by many housing industry observers.

When Obama announced the program in February 2009, he said up to 4 million people could save their homes through the loan modification program, which lowers eligible borrowers' monthly payments to no more than 31% of their pre-tax income. But more recently, officials have backtracked and said up to 4 million people could qualify for trial modifications, during which loan servicers assess their borrowers' eligibility and ability to pay.

Through February, around 170,000 distressed homeowners have received long-term modifications under the program.

Another $1.5 billion in TARP funds will be used to provide grants to state housing agencies in California, Arizona, Nevada, Florida and Michigan. These agencies are tasked with coming up with programs to assist the unemployed, the underwater who owe more than their homes are worth, and the second-lien holders.

CNNMoney.com senior writer Tami Luhby contributed to this report.  To top of page

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Index Last Change % Change
Dow 17,814.94 -2.96 -0.02%
Nasdaq 4,758.25 3.36 0.07%
S&P 500 2,067.03 -2.38 -0.12%
Treasuries 2.26 -0.05 -2.16%
Data as of 11:18pm ET
Company Price Change % Change
Apple Inc 117.60 -1.02 -0.86%
Bank of America Corp... 17.10 -0.08 -0.47%
Huntington Bancshare... 10.11 -0.07 -0.69%
Kinder Morgan Inc 40.75 -0.04 -0.10%
Ford Motor Co 15.68 0.01 0.06%
Data as of 4:05pm ET

Sections

Jet fuel prices are down about 18% since August, but don't expect a break in your air fare any time soon. More

Retailers are repeating Black Friday deals from year to year, and offering the same discounts at other times. More

Sales of iPads and other tablets are slumping badly in 2014, and won't likely be a big hit during the holidays as they were last year. More

Ever since the Ebola epidemic erupted in her hometown of Foya, Liberia, Deboriah Foko has been working with Doctors Without Borders to inform others about this deadly virus. Here are journal entries from a day in her life. More

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.