Wednesday, July 08, 2009

The devil's in the non-TARP 

I feel like I fawn over this website a bit in my posts, but Keith Hennessey does a great service in costing out all of the bailout (so far). It confirms a couple of points I've tried to make. First, the part that angered many voters last fall -- the bailout of banks directly, through what became the Capital Purchase Program -- has paid back $.87 on the dollar. In a perverse way, the bait-and-switch of the Obama administration with its focus on executive pay and other interferences in the banks probably increased the return on that bit of TARP. ("Perverse" insofar as if you wanted to help them and really worried about their finances, you wouldn't want to incentivize them to pay back quickly.)

Hennessey puts some data in perspective. The expected loss on the whole shooting match -- the foreclosure rescue plan, which is going to cost $50 billion but hasn't spent a dime yet; the $40 billion for GM and Chrysler, which doesn't include the screwing of creditors; -- comes out to about $138 billion. This is less than half of what we're spending on Fannie and Freddie.
CBO estimates that the cost to the taxpayers of the failure of the GSE�s, Fannie Mae and Freddie Mac, will be $384 B. That is 2.4 times larger than all the other TARP and non-TARP costs (shown here, and excluding the Fed) combined. Here�s the Budget Committee Republican staff�s Budget Bulletin:
CBO estimated that the federal government immediately absorbed a loss of $248 billion for the book of business the GSEs had in September 2008. To maintain an active mortgage market, the federal government is continuing to operate the GSEs, whose new commitments entered into after September 2008 would lose an estimated $136 billion over the 2009-2019 period according to CBO.
To be fair, the Fan/Fred die was cast many years ago, and there's bipartisan blame to share around. But I would hope someone in Bill O'Reilly's office digs that fact up and replays the Barney Frank interview, and then muses on having this same congressman helping to fix the current mess. Sorry I'll have to miss that -- someone tape it for me, please!