TARP Repayments Reach $164 Billion

An upbeat news release from the Treasury Department as we approach the holiday break: Wells Fargo (WFC) and Citigroup (C) have repaid $45 billion in TARP money, bringing total repayments to $164 billion. In addition, Treasury now expects that the portion of TARP that stabilized the banking system will actually generate a profit for taxpayers. (Of course, some of the other parts of TARP look like serious money losers, but we can discuss that in the new year.)

I couldn’t find the Treasury news release on its website (either I’m dense or the person in charge of that took the day off), so here’s the full text with my emphasis added:

Today, the U.S. Department of the Treasury received repayments on its Troubled Asset Relief Program (TARP) investments in Wells Fargo and Citigroup in the sum of $45 billion, bringing the total amount of repaid TARP funds to $164 billion. Wells Fargo repaid $25 billion under the Capital Purchase Program (CPP) and Citigroup repaid $20 billion under the Targeted Investment Program (TIP), both of which will wind down at the end of this year. Treasury now estimates that total bank repayments should exceed $175 billion by the end of 2010, cutting total taxpayer exposure to the banks by three-quarters.

In addition, effective today, Treasury, the Federal Reserve, the Federal Deposit Insurance Corporation and Citigroup terminated the agreement under which the U.S. government agreed to share losses on a pool of originally $300 billion of Citigroup assets. This arrangement was entered into in January of this year under Treasury’s Asset Guarantee Program (AGP) and was originally expected to last for 10 years. The U.S. government parties did not pay any losses under the agreement and will keep $5.2 billion of $7 billion in trust preferred securities as well as warrants for common shares that were issued by Citigroup as consideration for such guarantee. With this termination, the AGP is being terminated at a profit to the taxpayer.

Treasury currently estimates that TARP programs aimed at stabilizing the banking system will earn a profit thanks to dividends, interest, early repayments, and the sale of warrants. Total bank investments of $245 billion in FY2009 that were initially projected to cost $76 billion are now projected to bring a profit. Taxpayers have already received over $16 billion in profits from all TARP programs and that profit could be considerably higher as Treasury sells additional warrants in the weeks ahead. (emphasis added)

About Donald Marron 294 Articles

Donald Marron is an economist in the Washington, DC area. He currently speaks, writes, and consults about economic, budget, and financial issues.

From 2002 to early 2009, he served in various senior positions in the White House and Congress including: * Member of the President’s Council of Economic Advisers (CEA) * Acting Director of the Congressional Budget Office (CBO) * Executive Director of Congress’s Joint Economic Committee (JEC)

Before his government service, Donald had a varied career as a professor, consultant, and entrepreneur. In the mid-1990s, he taught economics and finance at the University of Chicago Graduate School of Business. He then spent about a year-and-a-half managing large antitrust cases (e.g., Pepsi vs. Coke) at Charles River Associates in Washington, DC. After that, he took the plunge into the world of new ventures, serving as Chief Financial Officer of a health care software start-up in Austin, TX. After that fascinating experience, he started his career in public service.

Donald received his Ph.D. in Economics from the Massachusetts Institute of Technology and his B.A. in Mathematics a couple miles down the road at Harvard.

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4 Comments on TARP Repayments Reach $164 Billion

  1. Repayment of TARP is a total joke. The banks are using the FED to make billions and then pay back the Treasury with that money. If I could borrow billions of at zero percent I could make quite bits of money as well.

  2. Didn’t I read that one bank was repaying by issuing more shares? Which means that the investors currently holding shares will see the value decline and new investors will actually be paying back the loan that they originally paid for with their taxes. I’m not saying that all of the financial instituitions are doing this, but I do remember a headline about one…

  3. The banks repaid their TARP bailout money with other bailout money and government guarantees that allowed the “too-big-to fail” to raise capital while the smaller banks could not. To say it was a profit is to use one-sided accounting that ignores the black holes of AIG, Fannie/Freddie, TALF-the cash for trash program, a Fed funds and discount rate of less than 1 that funded the purchase of longterm US treasuries, and the rest of the 11+ trillion committed and 3+ trillion spent of which TARP played a minor, but notorious role.

  4. No mention of the $66 Billion cost that the CBO projected? Or the smaller figure from the Obama administration thast said the cost to the taxpayers would be $50B? Funny how that difference comes to $16B

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