The new spin on TARP

We are a little more than a month away from a Congressional election and, surprise, what do we see but a series of stories and editorials about how the Troubled Asset Relief Program (TARP) will end up costing taxpayers much less than expected.  Remember in 2008 how alarmed we all were at the prospect of TARP costing as much as $700 billion?  The good news is that AIG and big banks such as Citigroup and Bank of America will return all TARP funds.  Right now estimates of the ultimate cost range between $66 and $105 billion. 

What the recent stories do not discuss: (1) no mention of the losses of Fannie Mae and Freddie Mac, estimated to be as much as $300 billion, and (2) no mention of the fine distinction between the TARP loans to GM and Chrysler (which have been repaid) and the direct Treasury loans (which await an IPO before we learn if there is anything to be repaid). 

The Bush and Obama administrations, plus Fed chief Ben Bernanke, deserve tremendous credit for preventing a complete financial meltdown in 2008-09.  The fact that most of the TARP funds are being repaid is without a question welcome news.  But TARP was not the only bailout game in town and the jury is still out on how the home mortgage and auto bailouts will play out.

The truth about GM repaying its TARP loan

Last week General Motors conducted a public relations blitz celebrating the repayment of its TARP loans. Treasury secretary Geithner also issued a press release saying GM has repaid its debt ahead of schedule.

Those with memories recall that GM received about $60 billion in government funds, but the TARP repayment amounted to a mere $6 billion. Also, GM is still not profitable. So where is the money coming from? GM CEO Ed Whitacre failed to note in his press release that GM drew upon another line of credit at the Treasury to pay off its TARP debt. Taxpayers continue to hold a sizable equity position in GM, but the odds that an IPO would make them whole are quite low. Today's NYT reports that the Congressional Budget Office expects taxpayers to take a $30 billion hit on GM.

My take: credibility is a precious asset, one that neither GM or the White House has in great supply right now. This phony message needlessly depreciates that asset further.