Skip to content Skip to footer site map

Navigate Up
Sign In

Treasury Notes

 A Wide-Angle Lens on the Government’s Financial Stability Programs

By: Tim Massad

Recently, you may have seen headlines about the falling cost of TARP. That’s good news for taxpayers. But TARP was only one part of a comprehensive set of initiatives that the government put in place to break the back of the financial crisis. Necessary support for Fannie Mae and Freddie Mac, as well as the critical efforts of the Federal Reserve and FDIC, were also instrumental to saving American jobs and restarting economic growth.

When evaluating the fiscal cost of the government’s broader efforts to restore financial stability, it is important to include a complete view of the expected profits and losses from all of those programs – not just TARP. And Treasury is releasing a new analysis today that does just that.

According to our forecast, the comprehensive set of measures put in place to stabilize the financial markets during the crisis – including TARP, programs administered by the Federal Reserve and FDIC, necessary financial support for Fannie Mae and Freddie Mac, and other critical initiatives – is expected to produce a combined profit of approximately $24 billion.


Lifetime Estimated Taxpayer Profit/(Loss)

TARP + AIG Common Stock


Treasury Dept.  Agency Mortgage-backed Securities Purchases


Treasury Dept. Temporary Guaranty Program for Money Market Funds


FDIC Programs


Federal Reserve Programs


Fannie Mae and Freddie Mac Preferred Stock Purchase Agreement





This estimate does not include the Recovery Act, which was critically important to beginning to rebuild our economy after we put out the immediate financial fire.  And it does not include the significant cost of this crisis to our economy.  Jobs were lost, businesses failed, household wealth declined, and tax revenues fell.  But the damage would have been far worse without the government’s emergency response. Moreover, the direct fiscal costs of the financial stability program are extremely low and almost without historical precedent.

Typically, government efforts to clean up financial crises have had significant fiscal costs. The Government Accountability Office has estimated that the net fiscal cost of addressing the much less severe U.S. savings and loan crisis was 2.4 percent of GDP. Additionally, an IMF study found that the average net fiscal cost of resolving 42 systemic banking crises between 1970 and 2007 was 13 percent of GDP.

As we’ve said before, while these emergency programs were necessary, no one wanted to bail out Wall Street. The fact that we expect to make a profit on these programs doesn’t change that fact. Americans were rightfully angry that it was necessary to provide taxpayer support to the same banks that caused the financial crisis.

We’ve worked with Congress to put in place critical reforms to help ensure that a program like TARP is never needed again. The Dodd-Frank Act provides a clearly defined and orderly procedure for winding down – at no cost to taxpayers – failing firms that pose a significant threat to our financial system. That’s a tool that we didn’t have at our disposal during the recent crisis. Without it, we had to resort to these emergency programs when the financial system teetered on the brink of collapse.

Dodd-Frank provides us with the tools to ensure that no firm will be insulated from the consequences of its actions. That no firm will be protected from failure. That no firm will benefit from the perception that taxpayers will be there to break their fall. 

Dodd-Frank makes clear that taxpayers must not be asked to bear the costs of a financial firm’s failure. And that’s critically important for the long-term health of our nation’s financial system and the broader economy.

Tim Massad is Acting Assistant Secretary for Financial Stability.

Posted in:  TARP
Bookmark and Share

Contact Us

Department of the Treasury
1500 Pennsylvania Ave., N.W.
Washington, D.C. 20220

General Information: (202) 622-2000
Fax: (202) 622-6415
Hours: Mon-Fri 8:00am - 5:00pm

Untitled 1
Untitled 1

E-Mail Signup

Sign Up to Receive News src= Sign up to Receive News