CBO Unveils New TARP Estimate

CBO has issued new numbers for the total costs of the Troubled Asset Relief Program (TARP). CBO now estimates that TARP will cost $25 billion over the life of the program. This is down $41 billion from CBO's previous estimate of $66 billion in their August 2010 Budget and Economic Outlook, $84 billion less than CBO's March 2010 estimate, and $88 billion less than OMB's most recent analysis (which relies on data up to May 31, 2010).

CBO gives the reasoning as to why the cost estimate has gone down over the past year:

"...additional repurchases of preferred stock by recipients of TARP funds; a lower estimated cost for assistance to AIG and to the automotive industry; lower expected participation in mortgage programs; and the elimination of the opportunity to use TARP funds for new purposes (because of the passage of time and the provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act."

Additionally, CBO found that:

"...the outcomes of most of the transactions made through the TARP were favorable for the federal government."

CRFB welcomes this bit of good news. Each new estimate seems to bring TARP's overall cost lower and lower, and we can only hope that continues. Even so, however, $25 billion is an incredibly low cost number for a program that likely prevented the U.S. economy from going into freefall.