The Treasury Expects Smaller Loss From Bailout of Banks

The projected cost of the government’s bailout of the nation’s financial system isn’t as bad as expected.

According to the NYT, the Treasury Department “expects to recover all but $42 billion of the $370 billion it has lent to ailing companies since the financial crisis began last year, with the portion lent to banks actually showing a slight profit.”

The new assessment of the Troubled Asset Relief Program [TARP], which was provided to the Times by two Treasury officials on Sunday ahead of a report to Congress on Monday, “is vastly improved from the Obama administration’s estimates last summer of $341 billion in potential losses from [the $700 billion bailout program]. That figure anticipated more financial troubles requiring intervention.”

Based on the new estimates the cost of bailing out the nation’s largest banks is going to be at least $200 billion less than previously thought, prompting the deficit forecast for this fiscal year to go down to about $1.3 trillion, from $1.5 trillion.

The officials said however, the government could still lose $100 billion more from the TARP in new loans to banks, aid to troubled homeowners and credit to small businesses.

Aside from the good news for the federal deficit, which now is in the trillions as a result of our reliance on debt to drive economic growth, the latest bailout accounting could serve as a way to tamp down some of the public anger against banks and Wall Street.

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1 Comment on The Treasury Expects Smaller Loss From Bailout of Banks

  1. The #1 issue has and always will be JOBS. Rather than addressing this issue first, Big Banks, Greedy automakers, and Wall Street goons cut in the TARP welfare line and gobbled up the lions share of the resources. What did we get in return besides their 200 billion dollar left-overs? The Housing and Auto industries are still sinking. The answer is simple; people with jobs BUY houses and cars. People without jobs LOSE houses and cars (see: If the President wants to keep his job, he better make sure we keep ours.

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