Archive for January 17th, 2009
TARP Asset Losses – 64 Billion and Counting
Saturday, January 17th, 2009
CBO estimates that the net cost of the TARP’s transactions (broadly speaking, the difference between what the Treasury paid for the investments or lent to the firms and the market value of those transactions) amounts to $64 billion—that is, measured in 2008 dollars, we expect the government to recover about three quarters of its initial investment.
It’s been so successful, Obama plans on accelerating the mortgage assets purchase program using the newly approved TARP fund. Yeah!
While Summers told Congress Obama’s Treasury would use between $50 billion and $100 billion for a mortgage modification program, a good chunk of the rest of the funds could be used to buy the illiquid assets from banks. The FDIC, which has authority to take “any action” with insured deposit-taking firms deemed necessary to counter “adverse effects on economic conditions or financial stability,” could also play a role.
“We think by leveraging TARP funds in this way, you could have a significant capacity to acquire troubled assets,” Bair, who is set to stay on under Obama, said. Officials could “require those institutions selling assets into this facility to contribute some capital cushion themselves.”
