More Eulogizing

As an addendum to FRW’s TARP obituary, the Department of the Treasury released today a nearly 100-page report entitled “Two-Year Retrospective” that provides a comprehensive overview of TARP’s two-year history.

Most significantly, the report lowers—yet again—the Treasury’s estimate for TARP’s total cost to the American taxpayer from $105 billion to $51 billion. According to the report, the new estimate reflects last week’s American International Group (AIG) announcement that a deal has been finalized for the Treasury to begin unwinding its nearly $50 billion investment in the company through TARP, mainly through the Treasury’s swapping of its preferred AIG shares for over one billion shares of common stock, which will be sold over time. Treasury states that if the common stock shares held through TARP are sold at the market closing price for October 1 of $38.86 per share, Treasury would take a lower-than-expected net loss of $5.1 billion.

The report does project, however, significant losses in TARP investments for U.S. auto companies and other initiatives to assist homeowners in avoiding foreclosure of $17 billion and $46 billion, respectively.

In addition, outside of TARP, the report projects “substantial losses” from Government Sponsored Enterprises (GSEs) Fannie Mae and Freddie Mac through Treasury Preferred Stock Purchase Agreements (PSPAs).

Download Troubled Asset Relief Program: Two Year Retrospective (PDF).

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