CBO adjusts TARP payback projections

The federal bailout might not be a political winner, but it's looking a bit better on the government's finances.

In a new report released this week, the Congressional Budget Office (CBO) trimmed how much it expected the Troubled Asset Relief Program (TARP) would eventually cost taxpayers. It now expects that when all is said and done, the program will cost $32 billion, down $2 billion from its December estimate.

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That projection is rosier than even the White House's. The Office of Management and Budget (OMB) currently pegs the cost of the bailout at $68 billion, driven largely by greater expectations about the costs of the government's housing relief programs — OMB estimates $30 billion more than does the CBO on how much will be spent on those programs.

CBO attributed its reduction to the fact that the government's remaining $50 billion investment in American International Group (AIG) had gained value.

However, despite those gains, the CBO still expects the government's investment in AIG to cost the government money, estimating $22 billion will ultimately be spent keeping the insurance giant that was at the epicenter of the financial crisis afloat.

As they ramp up reelection plans, President Obama and his surrogates have been eager to tout White House efforts to save the domestic auto industry. Vice President Biden paid a visit to a group of United Auto Workers in the swing state of Ohio earlier this month, where he hailed the president's conviction in stepping in to save American car companies from bankruptcy.

But strictly from the perspective of dollars and cents, the CBO expects the auto bailout to cost taxpayers roughly $19 billion. General Motors and Chrysler have already paid off $35 billion in government aid, but $37 billion remains outstanding. The government has already written off $7 billion in its effort to keep the industry afloat.

When TARP was crafted, $75 billion was set aside to help struggling homeowners modify their mortgages. Those efforts have came up short, with just $3 billion outstanding. The CBO estimates another $13 billion will go out the door under the program, and since those funds were never expected to be paid back, will end up costing the government $16 billion.

While TARP is most often decried as a bailout to big banks, the portion of the program that actually targeted financial institutions is reaping a windfall for the government. After buying up $205 billion in stock from roughly 800 financial institutions during the crisis, as well as throwing another $40 billion just at bank titans Citigroup and Bank of America, the CBO estimates the government will turn a $25 billion profit on that portion.