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TARP Cost Reduced by $11.4 Billion, Thanks Vikram

The Treasury Department said on Friday that it has lowered its estimate of the projected cost of the Troubled Asset Release Program by $11.4 billion to $105.4 billion.

The Treasury Department said today it has lowered the projected cost of the Troubled Asset Relief Program by $11.4 billion to $105.4 billion. We're still in the hole on the auto companies and AIG - and there's that bailout of Fannie and Freddie - but we'll take what we can get.

In August, the cost estimate of TARP stood at $341 billion. The revised projection is as of March 31 and comes primarily from the increase in Citigroup's stock during the first quarter. The Treasury marked its 7.7 billion Citi shares at $4.05, or 80 cents over the price at which they converted their preferred shares to common equity. Citi shares are trading around $3.78 today.

The cost of the government’s auto bailout was also revised downward as the the industry has improved and its AIG stake rose $2.9 billion in the first quarter.


TARP Charts!

The Federal Reserve has this new paper out about TARP that does a bit of highly suggestive eyebrow raising about some banks that shall remain nameless. They start from the awkward fact that TARP wanted everything in one bag but didn't want the bag to be heavy, or as they put it: The conflicted nature of the TARP objectives reflects the tension between different approaches to the financial crisis. While recapitalization was directed at returning banks to a position of financial stability, these banks were also expected to provide macro-stabilization by converting their new cash into risky loans. TARP was a use of public tax-payer funds and some public opinion argued that the funds should be used to make loans, so that the benefit of the funds would be passed through directly to consumers and businesses. So you might reasonably ask: were TARP funds locked in the vault to return the recipient banks to financial health, or blown on loans to risky ventures, or other? Well, here is Figure 1 (aggregate commercial and industrial loans from commercial banks in the U.S.): So ... not loaned then. But that's not important! The authors are actually looking not primarily at aggregate amounts of loans but at riskiness of loans and here's what they get:

Blanche Lincoln's Derivatives Provision All But Dead Now

Blanche Lincoln’s famed derivatives legislation, which would basically prevent any big bank from ever trading CDS again, has already been chastised by Barney Frank. Now, a senior Treasury official has essentially delivered another blow to the Lincoln legislation.