Remember the public outcry when the U.S. government announced its plans to offer bailouts to some of the nation’s biggest financial institutions? Taxpayers, television’s talking heads and some politicians railed against the decision, asking why the government should be responsible for saving private companies.
Turns out the bailouts might not end up so badly. The Troubled Asset Relief Program (TARP), originally slated to cost the nation more than $700 billion, could actually end up costing a small fraction of that, thanks to the overwhelmingly positive performances of some banks. The program, which expired Sunday, was not nearly the big-government behemoth many thought it would become.
The government and financial institution AIG announced a plan last week to begin repaying taxpayers for the costs of the bailout. AIG received nearly $70 billion of TARP funding to help pull it back from the precipice of failure.
The U.S. Treasury didn’t actually end up loaning out the full $700 billion allotted for the program. In fact, it only disbursed $387 billion of the funds, namely to hundreds of banks and a few large automobile makers. In the past year, the final cost estimates of the program have shrunk as banks have pulled away from the recession and paid back most of their bailout money in the process. In August, the Treasury estimated TARP at a $66 billion loss. In early October, that estimate fell to below $50 billion. At this point, the government is actually reducing the federal budget deficit with TARP repayment funds.
Experts say that while TARP has not brought the nation back to where it sat before the financial crisis, keeping the banks afloat helped the economy avoid taking an even deeper plunge into recession.
Still a Tough Sell
Despite the proven success of the TARP program, it still carries a negative connotation among taxpayers and many politicians as important mid-term elections loom across the nation.
U.S. President Barack Obama was not the one who issued the original order for TARP (although he did vote for it), but the plan’s reputation has lingered over his presidency during his time in office. Conservatives have typecast Obama as a big-government spender, backing up their assertions by pointing to his federal stimulus allocations and TARP, a program that his administration has overseen.
As of the end of September, experts estimated the bailouts given to banks and AIG would result in a $35 billion profit for the government, while the auto bailouts would result in a loss. Nevertheless, many citizens cite TARP as an example of the government putting businesses before taxpayers.