Treasury Notes

 Good News for Taxpayers on TARP

By: Tim Massad

Yesterday, Treasury announced that it had sold its final share of Citigroup common stock.

We once owned more than a quarter of the company. Today, we can say that we’ve fully exited our common stock TARP investment. And, in the process, made taxpayers a $12 billion profit.

In the last several weeks, we’ve continued to see strong evidence that TARP has proven successful at breaking the back of an intense financial panic and laying the foundation for future economic growth – at a significantly lower cost to taxpayers than anyone first anticipated. Citigroup was just one example.

TARP repayments to taxpayers have topped $250 billion.

The CBO has released a new report forecasting that TARP would cost taxpayers just $25 billion – a fraction of the $700 billion first authorized.

The successful GM IPO brought in a total of $13.5 billion for taxpayers – a testament to that company’s remarkable turnaround.

The U.S. auto industry continues to rebound strongly, adding thousands of jobs and posting strong sales gains.

AIG, which has continued to make significant progress in its restructuring plan, is on track to make a profit for taxpayers based on current market prices. The company’s recent return to the private debt markets also represents an important step towards its future independence.

In recent weeks, outside observers have also continued to praise TARP’s effectiveness.

Jonathan Chait, The New Republic: “TARP may end up going down as one of the most successful policy initiatives in American history.”

Ezra Klein, Washington Post: “There's an increasingly strong case that TARP may have been the most cost-effective economic policy ever passed.”

Richard X. Bove, Rochdale Securities: “[TARP] may have been the most successful United States program ever . . . The biggest winner in the TARP program was the American taxpayer. Not only did the program create a positive return to taxpayers but it reversed a decline in the economy which would have resulted in even more bankruptcies, lost jobs and wealth destruction.”

As Secretary Geithner has said, no one wanted to bail out Wall Street. It was unfair. It was appalling. But it was necessary to avert an economic disaster. Going forward, however, as TARP repayments continue to increase and evidence that TARP saved millions of jobs continues to mount, it’s our hope that more and more people will take a second look at the program. And when they do, we believe they’ll see that TARP played a critical role in rescuing our economy from the brink of an historic collapse and putting our nation on the path to recovery.

Tim Massad is Acting Assistant Secretary for Financial Stability at the U.S. Treasury Department
Posted in:  TARP
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