Through December 31, 2008, the Treasury disbursed $247 billion
to acquire assets under that program. CBO valued those assets using discounted
present-value calculations similar to those generally applied to federal loans
and loan guarantees, but adjusting for market risk as specified in the legislation
that established the TARP. On that basis, CBO estimates that the net cost of
the TARP’s transactions ... amounts to $64
billion—that is, measured in 2008 dollars, we expect the government to recover
about three quarters of its initial investment.
The Office of Management and Budget’s (OMB’s) report on the
TARP, issued in early December, only addressed the first $115 billion
distributed under the program. CBO and OMB do not differ significantly in their
assessments of the net cost of those transactions..., but they vary in their
judgments as to how the transactions should be reported in the federal budget.
Thus far, the Administration is accounting for capital purchases made under the
TARP on a cash basis rather than on such a present-value basis—that is, the
Administration is recording the full amount of the cash outlays up front and
will record future recoveries in the year in which they occur. That treatment
will show more outlays for the TARP this year and then show receipts in future
years.
The main reason for this post is
to highlight how the TARP bailout funds are being carried on the books of the
federal government. The cash approach used by the Bush administration
overstates the best estimates of the program's costs. Since the size of the
deficit and the accumulated debt will be used politically to oppose any further
policy measures such as health care reform, it's important to understand the
games that are being played in the presentation of the program's cost in the
federal budget.