America’s TARP’s bill: More than just cash

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In May, the Congressional Budget Office (CBO) projected the total financial cost of TARP to be $21 billion in the long run. While proponents of TARP may cheer this –the program will spend over $400 billion before it’s over – the long-term consequences of TARP cost far more.

First, from the report:

To fulfill its statutory requirement, CBO has prepared this report on the TARP’s transactions that had been completed, were outstanding, and were anticipated as of April 17, 2013. By CBO’s estimate, $428 billion of the initially authorized $700 billion will be disbursed through the TARP, including $419 billion that has already been disbursed and $9 billion in additional projected disbursements. The cost to the federal government of the TARP’s transactions (also referred to as the subsidy cost), including grants for mortgage programs that have not yet been made, will amount to $21 billion, CBO estimates (see table below).

So, yes, supporters of TARP, cheer all you like. Your bailout of the financial institutions that caused the 2008 crash (with the helping hand of Congress and bureaucrats) will only cost Main Street $9 billion. In addition to stock market losses, job losses, destroyed retirement savings, losses of homes, and many other costs.

However, the long-term impact of TARP is far worse than $9 billion. From Too Big To Jail to Dodd-Frank, the same organizations that worked so closely with Congress for their own benefit before the recession now have more power and influence than ever. Because of this, the next crash may be worse than what we saw five years ago. As Tea Party Patriots noted after the October 2012 CBO analysis of TARP:

This is indeed the problem with TARP. While politicians may cheer the “small” loss of $24 billion, the fact is that TARP has exacerbated the very same problems that caused the 2008 crash. To paraphrase former TARP Inspector General (and 2008 Obama donor) Neil Barofsky in his new book Bailout, Too Big To Fail is now essentially official policy of the federal government of the United States. And that is not a good thing for America.

As is typically the case in Washington, good news is outweighed by the bad news. TARP never should have happened in the first place, and now its backers have more reason to claim success – a success that will likely overshadow the real consequences of TARP.