TARP Datapoint of the Day

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?