Sunday, April 5, 2009

Congressional Budget Office Doubles Estimated TARP Cost To $356 Billion

In what should likely be a much more publicized piece of information, the Congressional Budget Office doubled the projected cost of the TARP bailout plan to $356 billion, versus an earlier estimate of $189 billion: an increase of $167 billion on the taxpayer's dime. According to the March CBO report, the total revised deficit under the Obama budget will hit $1.8 trillion in 2009 (and then never go negative pretty much in perpetuity, in other words deficit forever):

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.

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.
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.

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.

Sphere: Related Content
Print this post


Anonymous said...

Good grief! While listening to that NPR story about Lithium in tap water on NPR that was referred to in the comments on your story story link here

I saw an ad with a Black Swan in it... Creepy premonition!

(right click --> Open in New Window)
Screen Shot of Black Swan

Anonymous said...

"Obama budget will hit $1.8 billion* in 2009"...should be "$1.8 trillion"

Tyler Durden said...

thx. i can almost remember when a billion was a lot of money

Anonymous said...

Sunday night futures +7.00 on open.

The Rally Monkey is playing my song!

In Debt We Trust said...

I wish there was a way to trade CBO futures.

Munchausen said...

I'll call my proshares guy... I smell a new ultrashort ETF!

Anonymous said...

"thereby boosting the estimated subsidy cost of the Treasury’s purchases of preferred stock, asset guarantees, and loans to automakers."

This is just incorrect classification. It is a writedown, not a subsidy. The subsidy was provided as an investment. That investment is losing value, not increasing subsidy.