TARP Lives On

Emergency stimulus programs ought to be timely, targeted, and temporary. But, thirteen years after its creation, the Troubled Asset Relief Program (TARP) lives on in the federal budget and is projected to spend another $400 million.

After the collapse of the subprime mortgage market, TARP was established in the Emergency Economic Stabilization Act (EESA) of 2008. The EESA authorized $700 billion for TARP but the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 reduced the amount to $445 billion. 

The bulk of this funding was used to make loans to or purchase assets from banks and other financial institutions. For example, through TARP's $250 billion Capital Repurchase Program, the government purchased stock in eight major national banks, such as Goldman Sachs and Morgan Stanley. The auto industry and American International Group also received bailouts through the EESA with tens of billions of taxpayer dollars. TARP also provided $46 billion for mortgage assistance to prevent foreclosures.

The Congressional Budget Office (CBO) regularly reports on the fiscal status of TARP. In its newest analysis published this month, CBO notes that "nearly all transactions undertaken through TARP are now complete" with a total cost of $443 billion. However, CBO also reports that TARP expects to spend another $400 million on grants through its still-operating Hardest Hit Fund (HHF). CBO did not provide a timeframe for the outlays. 

This Fund aims to assist "struggling homeowners and stabilizing neighborhoods in many of the nation's hardest hit communities." The program provides federal assistance across 18 states and the District of Columbia. In 2016, Treasury announced it allocated an additional $2 billion to the program. 

Last year, the Senate Budget Committee (SBC) took a deep dive into the vast array of federal housing programs providing $50 billion a year through multiple departments and agencies, putting taxpayers on the hook for guaranteeing $2 trillion in loans. There are many overlapping programs that ought to be simplified and streamlined. Doing so would ease administrative and enforcement costs, improve services, and reduce waste of taxpayer dollars. 

If there are neighborhoods still purportedly suffering the impact of the 2008 economic crisis, perhaps there are other contributing factors holding back these communities that would be better addressed through one of the other 159 federal housing programs identified by the SBC. TARP's chapter in annals of budget history ought to end, especially since HHF program disbursements have been subject to numerous fraud investigations and convictions. The HHF ought to be terminated and the remaining funds should be rescinded and put toward deficit reduction.