Notes
All years referred to are federal fiscal years, which run from October 1 to September 30 and are designated by the calendar year in which they end. Numbers in the text and table may not add up to totals because of rounding.
The Emergency Economic Stabilization Act of 2008(division A of Public Law110-343) established the Troubled Asset Relief Program (TARP) to enable the Department of the Treasury to promote stability in financial markets by purchasing and guaranteeing “troubled assets.”1 Section 202 of that legislation, as amended, requires annual reports from the Office of Management and Budget (OMB) on the costs of the program.2 The law also requires the Congressional Budget Office to submit its own report within 45days of the issuance of OMB’s report each year. CBO’s assessment must discuss three elements:
- The costs of purchases and guarantees of troubled assets,
- Information CBO collects and the valuation methods it uses to calculate those costs, and
- The program’s effects on the federal budget deficit and debt.
In September2023, the last remaining investment made by the Treasury through the TARP was repaid, thereby ending the program. The Treasury no longer holds any assets related to the program and is not authorized to make further disbursem*nts. Consequently, this report is CBO’s final assessment of the costs of the TARP’s transactions.
By CBO’s estimate, $444billion of the$700billion initially authorized was disbursed through the TARP (see Table 1). (About $410billion of the total amount was disbursed by March2011.) CBO estimates that the government’s total subsidy cost was $31billion.3
Table 1.
Cash Disbursem*nts and Subsidy Cost or Gain of the Troubled Asset Relief Program
Billions of dollars
Data sources: Congressional Budget Office; Department of the Treasury. See www.cbo.gov/publication/59919#data.
Amounts shown reflect data available as of September 30, 2023.
OMB = Office of Management and Budget; SBA = Small Business Administration; * = between -$500 million and $500 million.
a.The Treasury agreed to provide an additional $5 billion to cover potential losses on Citigroup’s assets; however, those losses did not occur, so no disbursem*nts were made.
b.The Treasury committed $4 billion to absorb losses on loans made by the Federal Reserve through the Term Asset-Backed Securities Loan Facility; however, no losses occurred, and the Treasury recouped all of the $100 million in initial funding.
c.Of the $50 billion initially announced for the mortgage modification programs, which includes funding for state housing finance agencies and the Federal Housing Administration, $31 billion was disbursed, net of amounts returned by various state agencies.
The estimated cost of the TARP stems largely from grant programs aimed at preventing foreclosures on home mortgages, assistance that was provided to American International Group (AIG), and aid that was provided to the automotive industry. Taken together, other transactions with financial institutions yielded a net gain to the federal government from dividends, interest, and capital gains.
CBO’s assessment of the TARP’s costs is about the same as what the agency last reported in April2023.4 It is also similar to OMB’s latest estimate.
The U.S. financial system was in a precarious condition when the TARP was created, and the transactions envisioned and ultimately undertaken entailed substantial financial risk for the federal government. Nevertheless, the TARP’s net realized costs have proved to be near the low end of the range of possible outcomes anticipated at the program’s outset.
Costs of the TARP
To assess the value of the TARP’s asset purchases and guarantees, CBO used procedures similar to those specified in the Federal Credit Reform Act of 1990but with an adjustment to account for market risk, as directed by the Emergency Economic Stabilization Act of 2008. Because all transactions undertaken through the TARP are now completed and no programs have outstanding investments, CBO’s current report reflects the realized costs or gains.
Transactions of the TARP
The TARP’s transactions fall into four broad categories. Two of them resulted in net costs to the government:
- Mortgage programs (estimated net cost: $31billion), and
- Assistance to the automotive industry (estimated net cost: $12billion).
And two yielded net gains:
- Capital purchases and other support for financial institutions (estimated net gain: $9billion), and
- Investment partnerships designed to increase liquidity in securitization markets (estimated net gain: $3billion).
All of the support provided by the TARP has been repaid or terminated. Details of the transactions—including capital purchases and other support to financial institutions (AIG, Citigroup, and Bank of America, among others) and assistance to the automotive industry—are discussed in previous editions of this report (the most recent detailed report was published in May2022).5
About 70percent of the disbursem*nts went to support financial institutions. All told, those transactions yielded a net gain to the government.
The largest cost was for the mortgage programs, which stemmed from an initial commitment by the Treasury of $50billion in TARP funds for programs to help homeowners avoid foreclosure. Subsequent legislation reduced that amount, and the final $642million of available funding was deobligated on May31, 2023, closing the mortgage programs.6
Net disbursem*nts of TARP funds for all mortgage programs were $31.4billion. Because most of those funds were in the form of direct grants that do not require repayment, the government’s cost was close to the full amount disbursed (which is to say that the program had almost a 100percent subsidy rate). The cost for the mortgage programs was largely equal to what CBO reported in April2023.
Comparison of CBO’s and OMB’sEstimates
CBO has adopted most of the cost assessments for completed transactions that OMB published in its March2024report. CBO and OMB have used similar approaches to evaluate the TARP’s programs for purchasing assets and making grants. OMB’s most recent estimate of the program’s total cost is $0.4billion higher than CBO’s current estimate, which includes an adjustment to account for funds returned to the Treasury from various states administering housing programs. Specifically, OMB estimates a cost of $31.8billion for the Treasury’s mortgage programs, whereas CBO estimates a cost of $31.4billion.
Changes in CBO’s Estimates Since April2023
In its Report on the Troubled Asset Relief Program—April2023, CBO projected that the TARP would cost $31billion over its lifetime. CBO’s final estimate is about the same.
1.That law defines troubled assets as “(A) residential or commercial mortgages and any securities, obligations, or other instruments that are based on or related to such mortgages, that in each case was originated or issued on or before March14, 2008, the purchase of which the Secretary [of the Treasury] determines promotes financial market stability; and (B) any other financial instrument that the Secretary, after consultation with the Chairman of the Board of Governors of the Federal Reserve System, determines the purchase of which is necessary to promote financial market stability, but only upon transmittal of such determination, in writing, to the appropriate committees of Congress” (sec. 3 of P.L.110-343, 122Stat. 3767).
2.Originally, the law required OMB and the Congressional Budget Office to submit semiannual reports. That provision was changed to an annual reporting requirement by P.L.112-204. OMB’s most recent report on the TARP was submitted on March11, 2024, as part of Budget of the United States Government, Fiscal Year 2025: Analytical Perspectives (March2024), pp.72–73, www.govinfo.gov/app/details/BUDGET-2025-PER.
3.The subsidy costs for the various types of transactions were determined by calculating the net present value of the resulting cash flows.
4.Congressional Budget Office, Report on the Troubled Asset Relief Program—April2023(April2023), www.cbo.gov/publication/59091.
5.Congressional Budget Office, Report on the Troubled Asset Relief Program—May2022(May2022), www.cbo.gov/publication/58029.
6.Deobligation is the cancellation of previously incurred obligations.
The Congressional Budget Office prepared this report in response to the requirements of the Emergency Economic Stabilization Act of 2008, as amended. Previous editions are available at https://tinyurl.com/c85sn8pv. In keeping with CBO’s mandate to provide objective, impartial analysis, this report makes no recommendations.
Avi Lerner prepared the report with contributions from Zunara Naeem and guidance from Christina Hawley Anthony and Barry Blom. Robert Sunshine reviewed the report, Caitlin Verboon edited it, and R. L. Rebach prepared the text for publication. The report is available at www.cbo.gov/publication/59919.
CBO seeks feedback to make its work as useful as possible. Please send any comments to [email protected].
Phillip L. Swagel
Director
