Among the main adjustments in the inner projection years (2009 and 2010) is the increased assumption in TARP costs: $152 billion in 2009 and $15 billion in 2010. Curiously, the CBO is also projecting a substantial increase in FNM and FRE costs: $52 billion and $5 billion in the respective years.
On page 8 of the CBO report, the reason for the astounding increase in TARP costs is given:
Troubled Asset Relief Program.If it took a mere couple of months for projected TARP costs to double for taxpayers, ZH can't wait to see what the final cost will be as calculated by the CBO will be in another 9-12 months.
Since January, CBO has raised its estimate of the net cost (on a present-value basis) of the transactions covered by the TARP by $152 billion for 2009 and by $15 billion for 2010. Those revisions stem from three factors—changes in financial market conditions, new transactions, and a small shift in the anticipated timing of disbursements. Since CBO’s previous estimate was completed, market yields on securities issued by the firms that have received TARP funds have increased, thereby boosting the estimated subsidy cost of the Treasury’s purchases of preferred stock, asset guarantees, and loans to automakers. Also, the Treasury announced additional deals with Bank of America and American International Group (AIG) as well as participation of up to $50 billion in the Administration’s foreclosure mitigation plan, all of which involve subsidy rates that are higher than the averages in the previous baseline.
I recommend readers flip through the entire CBO report not only for the pretty charts, but to see the slow motion trainwreck our economy is becoming, based on current insane spending projections, which dig the economy into a hole so deep that there is nothing in conventional finance that could possibly pull it out absent eventual hyperinflation or sovereign default.
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