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 16,408.54 -16.31 -0.10%
Nasdaq 4,095.52 9.29 0.23%
S&P 500 1,864.85 2.54 0.14%
Treasuries 2.72 0.08 3.19%
Data as of 1:41pm ET
Company Price Change % Change
Bank of America Corp... 16.15 0.00 0.00%
Facebook Inc 58.94 0.00 0.00%
General Electric Co 26.56 0.00 0.00%
Cisco Systems Inc 23.19 -0.02 -0.09%
Micron Technology In... 23.91 0.00 0.00%
Data as of Apr 17
Sponsors

Sections

Spencer has been a supporting member of the "Good Morning America" cast for the past three years. More

Obamacare sign ups hit 8 million, though final enrollment remains to be seen. More

Office for iPad move is a symbolic victory for Nadella's Microsoft, but the company is still weighed down by many of the same old issues. More

Schwinn, Trek and Cannondale are all iconic American bicycle brands. But none of them are made in the United States. More

As Detroit moves closer to reaching a bankruptcy deal, retired civilian workers are poised to be left worse off than firemen and police officers. More

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.