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Thursday, November 12, 2009

TARP Funds To Bring Taxpayer Loss: Reviewed:

Neil Barofsky says that the TARP program will almost certainly bring about taxpayer losses. However, let's see who is really responsible for these losses. (Hint: they're not the banks.)

The NY Times has a useful guide from June that shows all of the TARP recipients, which fall into the following categories:

Citigroup: $50 billion
B of A: $45 billion
Other banks: $79 billion
AIG: $70 billion
Automakers: $85 billion
Homeowners: $50 billion
Small business: $15 billion
PPIP: $100 billion
TALF: $55 billion
Unused: $80 billion
Already returned: $70 billion (likely higher today)

I'm confident in saying that the Treasury will make money on its bank investments (after factoring in interest and gains from warrant sales). The government will likely get a large portion of its AIG investment back, despite running the top talent out of the company.

There is not a lot of info on PPIP and TALF funds, so it's hard to estimate what the return will be.

That leaves the automakers, homeowners and small business investments of $150 billion. This is what we used to call pork - and the money is already gone. Hey, I could actually live with this if the government took the remaining funds (and that amount to be returned by banks) and "retired" the money. After all, TARP was supposed to be a temporary program to help the financial institutions.

Unfortunately, Obama thinks the money belongs to him and he is determined to spend every last dime that gets returned. And for that reason alone, taxpayers will likely see a huge loss from TARP.