TARP cost will be a 'fraction' of original price tag

By Ben Rooney, staff reporter


NEW YORK (CNNMoney.com) -- Treasury Secretary Tim Geithner outlined the benefits of the government's bailout of the financial system Thursday, saying that the overall cost will be a "fraction" of the original estimate.

Geithner told the Congressional Oversight Panel that the cost of TARP, the Troubled Asset Relief Program, will be no more than the amount spent on the program's housing initiatives.

"The remainder of the investment programs under TARP -- in banks, AIG, credit markets, and the auto industry -- will likely, in the aggregate, ultimately yield a positive return for taxpayers," he said.

The government created the $700 billion program at the height of the financial crisis in 2008. But the cost of TARP has been significantly reduced in the years since, as the economy has stabilized and investments made under the program have become profitable.

"Because of the success of the program, TARP is likely to cost a fraction of that amount," he said. The bailout, he said, "will rank as one of the most effective crisis response programs ever implemented," in terms of direct financial cost.

The Congressional Budget Office estimated last month that TARP will cost taxpayers $25 billion, down from a previous projected cost of $109 billion in March.

Geithner said he thinks the final cost will be below the CBO's estimate. "I think it's a little high," he said about the $25 billion projection. Although he acknowledged much of it depends on how the government's housing initiatives play out, among other things.

TARP, enacted under the Bush Administration, was initially intended to stabilize the banking system by buying or backing "troubled assets." It subsequently evolved into a broader effort to rescue the economy and prop up the housing market.

The bulk of the remaining cost of TARP stems from the bailout of insurance giant AIG and the auto industry, as well as efforts to prevent foreclosures, according to CBO. Those programs cost about $45 billion, while other transactions resulted in a net gain of $20 billion for taxpayers.

Geithner said the economy has made "substantial progress" since the recession ended last year. But he acknowledged that significant challenges remain for the economy and the financial system.

"We are still living with the scars of this crisis, and both our financial system and the economy as a whole continue to show signs of significant damage" he said.

While household wealth has begun to recover, Geithner noted that many families are still struggling with high unemployment and financial stress. The housing market "remains weak" and small businesses are still under pressure, even as larger companies have returned to profitability, he said.

"It's going to take years -- years -- to repair the damage," he said. 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 18,203.37 -85.26 -0.47%
Nasdaq 4,979.90 -28.20 -0.56%
S&P 500 2,107.78 -9.61 -0.45%
Treasuries 2.12 0.04 1.82%
Data as of 7:10pm ET
Company Price Change % Change
Bank of America Corp... 16.04 0.03 0.19%
Apple Inc 129.36 0.27 0.21%
Ford Motor Co 16.17 -0.40 -2.41%
Cisco Systems Inc 29.54 -0.65 -2.15%
Microsoft Corp 43.28 -0.60 -1.37%
Data as of 4:02pm ET
Sponsors

Sections

The historically black school will cover 50% of the cost of a a student's final semester if they graduate early or on time, starting next year. More

ISIS and jihadi videos on YouTube were running ads for things like Secret, Aveeno and Bud Light. The companies -- and YouTube -- said this was a mistake. More

Find yourself suddenly holding one big lump sum of cash? Here's what you need to know to make sure your money is invested the way it should be. More