Watchdog: $133 billion in TARP funding still hasn’t been repaid

American taxpayers still have $132.9 billion in funds tied up in federal bailout programs, and they will not recoup all of that investment, according to a new watchdog report.

The Special Inspector General for the Troubled Asset Relief Program (SIGTARP) told lawmakers in its quarterly report that the Treasury has already lost $12 billion on the broad bailout program, with more losses potentially to come.

“Taxpayers will never get back some of these funds,” SIGTARP stated in its report.

In addition, while the government has been winding down its involvement in the program, the watchdog noted that some aspects of the program will linger “for years.”

The new report provides a stark reminder of the challenges facing TARP, even as the Treasury Department has been eager to tout the successes of the often-reviled initiative.

The report noted that some programs under TARP, mainly targeted at housing, were never intended to be paid back — the Treasury has the ability to dole out $51 billion more in that effort through 2017.

The watchdog also noted that, even as the Treasury is trying to exit some investments in firms such as American International Group (AIG) and General Motors, the slow economic recovery and volatile financial markets have posed challenges. The Treasury estimated it needs to sell its 1.5 billion shares of AIG stock at $28.73 per share to break even, and its 500 million shares in GM at $53.98 per share.

Unfortunately for the government, the stock of those two companies has fluctuated wildly in the last few years, and currently sit below that break-even level — AIG is at $25.21 and GM is at $25.26. The watchdog noted that the Treasury might be stuck holding those investments for “a significant amount of time” if it insists on not taking a loss. And even if prices do hit an appealing level, it could take some time for the government to sell off its massive stake in the companies.

Despite these challenges, by most accounts TARP has exceeded expectations when it comes to the ultimate cost. Originally billed by detractors as a $700 billion boondoggle, the Congressional Budget Office most recently estimated the ultimate cost of the program would be around $34 billion. The Treasury estimated that TARP will run at around $68 billion — still a fraction of original fears.

Responding to the watchdog’s report, the Treasury touted its efforts to steer the large program to a conclusion while minimizing losses to the taxpayer.

“Treasury has made substantial progress winding down TARP, and has already recovered more than 77 percent of the funds disbursed for the program through repayments and other income,” said Treasury spokesman Matt Anderson. “We’ve made clear that moving forward we’ll continue to balance the important goals of exiting our investments as soon as practicable, and maximizing value for taxpayers.”

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