The reporting of the Congressional Budget Office on the "subsidy cost" of the TARP is been widely reported, but I pulled this and the accompanying quote off of FT Alphaville because of the lovely juxtaposition.
Remember how the TARP funds were supposed to be an investment for taxpayers? Well, the CBO has reported, despite general unwillingness to provide any sort of specific information about the TARP, exactly how well this investment has played.
"Amount" is how much the assets cost when the US bought them. The "subsidy" amount is the difference between how much the assets were bought for, and how much they are worth now. In other words, this is the amount of money that was just given away. The subsidy rate is the percent rate that we would be looking at if this was actually some sort of investment, and not a cash give away.
American Taxpayers made -26% over about one quarter. That's $64 Billion just thrown into the void.
And, the funny part is (because there is a funny part, right?) that even after doing this, all these banks are still failing.
And then, there is this gem, from Felix Salmon at Portfolio.com:
"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?"
Yes, why don't we?
Again, thanks again to FT Alphaville, one of the sites that has provided a large amount of my economics education, and from which I just lifted this post wholesale, only adding a bit of attitude.
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