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Author Topic: TARP  (Read 24 times)
OzmO
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« on: April 17, 2014, 08:01:29 AM »

http://econlog.econlib.org/archives/2014/04/ive_won_my_tarp.html



Back in 2008, I noted an obscure TARP provision:

SEC. 134. RECOUPMENT.

Upon the expiration of the 5-year period beginning upon the date of the enactment of this Act, the Director of the Office of Management and Budget, in consultation with the Director of the Congressional Budget Office, shall submit a report to the Congress on the net amount within the Troubled Asset Relief Program under this Act. In any case where there is a shortfall, the President shall submit a legislative proposal that recoups from the financial industry an amount equal to the shortfall in order to ensure that the Troubled Asset Relief Program does not add to the deficit or national debt. (emphasis mine)

In response, I publicly offered the following bet:

If the Director of the OMB's 2013 report says that a shortfall exists, I win.  Otherwise, I lose.  The stakes: I will make up to five $100 bets at even odds.
The OMB's 2013 report is now in.  You can download all 510 pages here, then turn to page 39:

As of December 31, 2011, total repayments and income on TARP investments were approximately $318 billion, which is 77 percent of the $414 billion in total disbursements to date. The projected total lifetime deficit impact of TARP programmatic costs, reflecting recent activity and revised subsidy estimates based on market data as of November 30, 2011, is now estimated at $67.8 billion.

Graphically:


This is actually more pessimistic than the OMB's previous update, which also had me on track to win:

Compared to the 2012 MSR estimate of $46.8 billion, the estimated deficit impact of TARP increased by $21 billion. This increase was largely attributable to the lower valuation of the AIG and GM common stock held by Treasury.
If you don't wish to download a 510-page pdf, try the CBO's 8-page summary of the OMB report, combined with the CBO's slightly different (but still negative) estimates of TARP's budgetary costs. 

TARP was passed on October 3, 2008.  Since the CBO's report is dated May 23, 2013, you could argue that I am declaring victory a few months prematurely.  However, the CBO report also explains that this is the 2013 TARP report:

Originally, the law required OMB and CBO to submit semiannual reports. That provision was changed by Public Law 112-204 to an annual reporting requirement. OMB's most recent report on the TARP was submitted on April 10, 2013.

None of TARP's cheerleaders accepted my bet, even though their announced beliefs seemingly implied that betting me would be taking candy from a baby.  As far as I can tell, the only people who clearly accepted my bet were EconLog readers Michael K and Rick Stewart.  Steve Roth somewhat ambiguously accepted, so I leave payment to his conscience.

HT: Philip Wallach at Brookings for reminding me about the bet.
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