The Myth of TARP's "Profit"

You've probably heard about the recent end of the Troubled Asset Relief Program (better known as TARP) ((also known as the outrageously outrageous $700 billion Wall Street Bailout)) (((also known as the "reelection killer"))).  Supporters of the program have been crowing about the fact that it appears to have made money, about $25 billion worth over two years.  So, all is peachy, right?  I mean, we totally saved the economy from complete and total armageddon that would have resulted in approximately 9.8 BILLION people losing their jobs and an unemployment rate of 6,728% and made a PROFIT for our trouble.

Allow me to burst your bubble. That $25 billion profit is a myth, a fiction of Washington accounting (like so many other numbers we hear), and here's why: because the banks that got bailed out through TARP shuffled all of their bad assets over to Fannie Mae and Freddie Mac, which got their own separate bailout.  So, really, it should be no surprise that they're relatively healthy.  They cut out the cancer and passed it right along to Fannie and Freddie.  The banks have issues with the current foreclosure mess, but the worst loans are no longer their problem, they're taxpayers' problem.

So, just how big is that problem?  Well, big.  Really big.  Their regulator is reporting that they could need another $215 billion worth of cash infusions over the next three years alone just to stay afloat.  That's on top of the $148 billion we've already shelled out for them.  That means that the top-line cost could rise as high as $363 billion.  When you subtract the $25 billion profit from TARP from that number, our bailout of Wall Street from their mortgage mess through Fannie/Freddie could cost $338 billion.

That's what a REAL accounting of the bailout would look like.  Sure, TARP doesn't look so bad on paper, but that's because we just had Fannie/Freddie buy up most of their toxic assets.  It's not unlike what happened with General Motors in their bankruptcy restructuring.  They only exist because bankruptcy allowed them to cut out much of their cancer and leave it in a holding company that's worth very little and is separate from GM.

We may have made a profit on TARP, but we did NOT make a profit on the Wall Street bailout as a whole and anyone who suggests we did isn't telling you the truth.