10 Years ago today, on October 3, 2008, President George W. Bush signed the Emergency Economic Stabilization Act of 2008, creating the Troubled Asset Relief Program (TARP) and authorizing the expenditure of up to $700 billion. Pursuant to its obligations under TARP, the Treasury still publishes regular reports on its investments and activities thereunder. The Treasury has also published a TARP Tracker that provides an interactive and chronological history of TARP.
The various components of TARP were not developed (and then further streamlined) over the next year or so, but the 10-year anniversary of the overall program seems like an appropriate time to look at the overall results of the program. (In fact, the very thought that TARP would become primarily a program of investments in banks 10 years ago would probably have been laughed at… everyone felt it was going to focus on purchasing toxic assets.) Over the next several months, we’ll periodically look back on the developments (with the benefit of hindsight), including looking at the launch of this blog.
While $700 billion was initially authorized, the authorization was subsequently reduced to $450 billion. Based on the latest Monthly Update published by Treasury, just over $440 billion was disbursed and only $70 million remains outstanding today. Overall, the U.S. Treasury has received just over $443 billion in cash back as a result of its expenditures under TARP.
While overall TARP was actually profitable for the U.S. Treasury, when you break down TARP into categories of programs, one can see that the bank investment component (which is generally thought to be the most controversial aspect) was actually the most profitable.
Looking specifically at the various bank investment programs, the government invested a total of $245.1 billion. Of that investment, it did recognize write-offs and realized losses of over $5.2 billion. However, it also recognized over $35.7 billion in income (primarily dividends and profits on sold investments), resulting in a total cash return of $275.5 billion on its $245.1 billion investment.
While the credit market programs were ultimately a much smaller piece of TARP, they also generated a nice profit for the government. The Treasury ultimately disbursed almost $19.1 billion and received over $23.6 billion in cash.
The programs for AIG and the auto industry were more of a mixed bag. Ultimately, inclusive of common shares received in connection with a loan from the Federal Reserve Bank of New York, AIG received $67.8 billion under TARP and the government ultimately recovered $72.8 billion. With respect to the Automotive Industry Financing Program, the Treasury disbursed almost $79.7 billion and ultimately recovered only $70.55 billion.
Lastly, TARP ultimately provided a number of programs intended to directly assist homeowners. Unlike the other programs, these were not structured as financial investments where a financial return was expected, but rather as societal investments where the returns are social and much harder to quantify. The Treasury ultimately disbursed a little over $28.6 billion in these programs.