TARP costs more than halved in new budget

The cost of the Troubled Asset Relief Program (TARP) has more than halved in the president's fiscal 2012 budget, as bailout programs are now estimated to add just $48.3 billion to the federal deficit.

The administration estimated the programs would cost $114.5 billion in July, as part of its mid-year budgetary review. The president's new budget represents a 57.8 percent reduction from that estimate.

The administration credits the shrinking price tag primarily to the comeback of the stock market following the financial crisis. Since the majority of the TARP funds still outstanding are affected by market movements, such as the Treasury holding substantial amounts of stock in bailed-out companies, the taxpayer has reaped the benefits of the economic comeback.

However, the administration's estimates still exceed the most recent prognostication offered by the Congressional Budget Office (CBO). The budget referee estimated in November that TARP will cost the federal government just $25 billion.

The discrepancy is due to the administration's greater optimism about TARP housing programs -- the CBO projects $12 billion in total TARP spending on housing, whereas the administration's Office of Management and Budget is anticipating $46 billion in spending on the programs.

The administration's attempt to help ailing homeowners, led by the Home Affordable Modification Program (HAMP), have largely failed to meet expectations, leading some Republicans to call for the elimination of the programs.

But overall, the government has enjoyed a run of good news surrounding TARP, which has been long-reviled and politically toxic. General Motors had a successful initial public offering of its stock after the government rescued the domestic car company, several financial firms have paid back, with interest, loans made under TARP, and the government made a $12 billion profit on its bailout of Citigroup after selling off billions in company shares.

And the troubled insurance company, American International Group, Inc. (AIG), finalized plans in January that should ultimately free it of government support in the coming years. When the restructuring of AIG's finances was finalized, Treasury Secretary Timothy Geithner said he was confident the government would recoup all $68 billion it currently has pumped into the firm.