Bryan Caplan  

TARP Bet Bleg

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As far as I can tell after a quick read, this OMB report says that I'm on track to win my TARP bet in 2013.  But I'd rather outsource this to outside readers.  Anyone?

Update: Does anyone dispute that this is the key figure in the report?


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COMMENTS (8 to date)
Megan McArdle writes:

There is one qualifier: TARP as it existed in 2008 is probably in surplus. The reason it's in deficit is the Obama administration's decision to divert funds to homeowners and GM/Chrysler.

Josh writes:

Does the OMB take into account other subsidies TARP banks may have gotten from Treasury/Fed etc. to give them the cash needed to repay TARP? Bloomberg reported on some of this in 2011, for example. If not, TARP as it existed in 2008 might be in surplus nominally, but not truly.

Rich Berger writes:

At first, I found the chart a bit confusing. It is not the year by year deficit, but each year's revised estimate of the cost. If I am interpreting this correctly, the initial outlay for TARP made FY 2009 deficit look much worse and the FY10 and later look better.

Mike W writes:

Did Kessler take the bet?

Doug T writes:

Did your bet take into account the diversion of funds to the auto companies and/or the HAMP program? If not, then it's theoretically impossible for the earnings from the preferred dividend and warrants to make up for those allocations.

The only high-prof loss to TARP funds was the loss at CIT, $2.3 billion. The ones that came late January were rounding errors. And in lending to banks, the gov't made over $20 billion in earnings.

Now, that doesn't take into account the opportunity cost of the money, much less the public policy implications of having the Federal gov't buy preferred shares of banks, but you still need an honest accounting. Just because a politician diverts a honey-pot away from it's original purpose doesn't mean the program was fatally flawed in its inception.

Mike Rulle writes:

I think Meghan and Rich are correct.

The key feature in the report is that there is a report to begin with. This started us down the road of TBTF and the dominant perception the banks have stepped into Fannie and Freddie's spot. The latter are now direct guarantees, the former are now implied guarantees.

Given the deficit was zero (Meghan's view) my axe has always been it never should have happened to begin with and this just confirms that view was correct.

Brian Clendinen writes:

The main issue which Bryan relized when he made the bet is purchases from other departments. The Federal Reserve bought TARP assets of about 170 billion. In addtion, AIG currently has a loan of $23+ billion from the Fed. Of the 170 billion $95 billion was for AIG’s holdings.

So if TARP had not toched GM/Crystal and AIG you might of lost the bet Bryan.

Brad Strang writes:

Would probably be in a surplus? I do not believe that is true, once those funds entered the realm of deliberative democracy, the concept of surplus vanished.

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