Surprise- Large Part of TARP Won’t Be Paid Back
According to Neil Barofsky, special inspector general of the Troubled Asset Relief Program (TARP), TARP money did its job (pulling us back from the brink of economic disaster), but also said, “The American people’s belief that the funds went into a black hole, or that there was a transfer of wealth from taxpayers to Wall Street, is one of the worst outcomes of this program, and that is the reputational damage to the government.”
The report comes out today- it’s 256 pages long. As a former Heritage Foundation intern who researched the TARP bailouts last fall, I only hope we can recover a large fraction of the money handed out, something I find unlikely. According to USA Today: “The report criticized Treasury’s implementation of the program and its lack of transparency, making 41 recommendations, 18 of which were implemented. Barofsky says it’s “extremely unlikely” that taxpayers will recover the $77 billion committed to the ailing auto industry or the $60 billion in TARP assistance to American International Group as part of a pledge of up to $180 billion in aid. An additional $50 billion to modify unaffordable home mortgages “will yield no direct return.”
Financial experts say it’s no surprise that the government won’t be able to recoup all of its investment in TARP. “Anybody who said this was all secured lending that would surely be repaid was kidding himself,” says Lawrence White, economics professor at New York University’s Stern School of Business.
To be sure, 47 financial companies have repaid $72.9 billion to the government. And Treasury has received interest and dividend payments or sold warrants for an additional $12.4 billion.”
So the question remains- which is worse? A deep, deep recession from which only the strong survive (a “without TARP” scenario) or a semi-deep recession followed by a staggering, limping and slow recovery from which hundreds of billions of dollars in borrowed funds will need to be paid back by American citizens over the next generation or ten?
Only time will tell, of course. Hopefully, the report helps us know the answer.
