The CBO has done the hard work of marking to market all the assets purchased with TARP funds, including preferred stock in various banks. It concludes that today’s mark-to-market value of the $247 billion spent in 2008 is just $183 billion, and that the government essentially used the TARP to subsidize the US financial system to the tune of $64 billion last year. This table comes from the full report:
This table gives the best indication yet of where Treasury’s subsidies are really going. The recapitalizations account for half the total subsidy, but in a sense they’re cheap — a subsidy rate of just 18% — since they’re 72% of the total outlays.
In contrast, the $20 billion of emergency funds which went to Citigroup constituted a government giveaway of $5 billion — a 26% subsidy rate. And the subsidies for AIG (53%) and the auto sector, including GMAC (63%) were higher still.
I would very much like to be able to see the breakdown of the subsidies within the capital purcahse program — presumably the subsidies to strong banks are much lower than the subsidies to weak banks, but it would be great to see them itemized.
I look forward to Treasury telling us, before it spends any more TARP funds, what kind of subsidy rate it considers acceptable. There’s a total of $453 billion in TARP funds not spent in 2008; if those too have a subsidy rate of 26%, that’s equivalent to government expenditure of another $118 billion. To put that number in perspective, the market capitalization of Citigroup and Bank of America combined is just $55 billion. Isn’t it about time we just nationalized them?