Projected Tarp Costs Reduced by $11.4 Billion

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Projected Tarp Costs Reduced by $11.4 Billion

Higher-than-Expected Repayments and Valuation of Investments Improve Prospects for Taxpayer Returns


WASHINGTON, DC – Today, the U.S. Department of the Treasury notified Congress that the projected cost of the Troubled Asset Relief Program (TARP) has decreased by $11.4 billion to $105.4 billion since the FY 2011 President's Budget. TARP was authorized under the Emergency Economic Stabilization Act of 2008 with the primary purpose of restoring liquidity and stability to the financial markets. As recently as the Midsession Review released last August, the Administration estimated the cost of TARP would be $341 billion.


As Assistant Secretary for Financial Stability Herb Allison detailed in a letter to Congress, this cost projection has improved as TARP repayments have been greater than initially anticipated – approximately $190 billion has already been repaid – and values of some major investments have increased.


"TARP has succeeded in achieving its intended goal of stabilizing the economy and putting America back on track for future growth," said Assistant Secretary Herb Allison. "And today, not only have we averted an economic catastrophe, we're in a stronger position sooner than anyone predicted."


The decreases in total costs are primarily a result of appreciation in the value of the 7.7 billion shares of Citigroup common stock held by Treasury. As of March 31, 2010, each share had a market value of $4.05, or $0.80 over the price per share when the company's preferred shares were converted to common equity by Treasury. In addition, the estimated value of Treasury's

Automotive Industry Financing Program investments has increased as the outlook for the domestic automobile industry has improved. Lastly, estimated cost related to AIG has decreased by $2.9 billion as prospects for the company have improved.


Remaining TARP costs are derived from homeowner relief programs as well as the assistance provided to the automotive industry and AIG. Programs that were designed to assist banking institutions will result in a net gain to the taxpayer.


As part of the Administration's ongoing commitment to transparency regarding TARP's cost to taxpayers, Treasury's Office of Financial Stability (OFS) will provide updated cost assessments four times per year.


A summary of TARP investments is available here: http://www.financialstability.gov/docs/ ... 202010.pdf


Methodology used is available here: http://www.financialstability.gov/docs/ ... _FINAL.pdf



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