The Corner

TARP May Be More Costly Than First Thought

What a surprise! According to the Wall Street Journal:

The Congressional Budget Office has quietly altered its estimate of the ultimate cost to taxpayers of the $700 billion Troubled Asset Relief Program — and now figures it’ll be much more expensive in the long run than it previously figured.

If you remember, originally we were told that taxpayers could even make money from the bailout. The idea was that the government would buy the banks’ toxic assets and extend financial institutions’ loans but that eventually most of that money would be returned and acquired securities would be sold with a profit. Quickly, this scenario was revised.

The Journal explains:

In January, CBO put the ultimate cost to taxpayers of the $700-billion TARP at $189 billion. When it issued revised numbers in late March in its “Preliminary Analysis of the President’s Budget” it revised that up to $356 billion with little comment, a change that drew little attention. The larger estimate reflects, among other things, the Treasury’s move to use the TARP to help avoid foreclosures as well as the changing details of its aid to American International Group and the deterioration of financial conditions and of banks in which the Treasury has invested TARP money.

Read the whole thing here and the CBO report here.

Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University.

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