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Report on the Troubled Asset Relief Program - May 2013 1 (May 23, 2013)

handle is hein.congrec/cbo11156 and id is 1 raw text is: MAY 23, 2013 Report on the Troubled Asset Relief Program-May 2013 In October 2008, the Emergency Economic Stabilization Act of 2008 (Division A of Public Law 110-343) estab- lished the Troubled Asset Relief Program (TARP) to enable the Department of the Treasury to promote stability in financial markets through the purchase and guarantee of troubled assets.' Section 202 of that legis- lation, as amended, requires the Office of Management and Budget (OMB) to submit annual reports on the costs of the Treasury's purchases and guarantees of troubled assets.2 The law also requires the Congressional Budget Office (CBO) to prepare an assessment of each OMB report within 45 days of its issuance. That assessment must discuss three elements: 1. The law defines troubled assets as (A) residential or commercial mortgages and any securities, obligations, or other instruments that are based on or related to such mortgages, that in each case was originated or issued on or before March 14, 2008, the pur- chase of which the Secretary determines promotes financial market stability; and (B) any other financial instrument that the Secretary, after consultation with the Chairman of the Board of Governors of the Federal Reserve System, determines the purchase of which is necessary to promote financial market stability, but only upon transmittal of such determination, in writing, to the appropriate committees of Congress. 2. Originally, the law required OMB and CBO to submit semian- nual reports. That provision was changed by Public Law 112-204 to an annual reporting requirement. OMB's most recent report on the TARP was submitted on April 10, 2013, as part of Office of Management and Budget, Budget of the United States Government, Fiscal Year 2014: Analytical Perspectives, (April 2013), pp. 30-48, www.whitehouse.gov/omb/budget/Analytical-Perspectives. The costs of purchases and guarantees of troubled assets, The information and valuation methods used to calculate those costs, and The impact on the federal budget deficit and debt. To fulfill its statutory requirement, CBO has prepared this report on the TARP's transactions that had been completed, were outstanding, and were anticipated as of April 17, 2013. By CBO's estimate, $428 billion of the initially authorized $700 billion will be disbursed through the TARP, including $419 billion that has already been disbursed and $9 billion in additional pro- jected disbursements. The cost to the federal government of the TARP's transactions (also referred to as the subsidy cost), including grants for mortgage programs that have not yet been made, will amount to $21 billion, CBO estimates (see Table 1). The estimated cost of the TARP stems largely from assis- tance to American International Group (AIG), aid to the automotive industry, and grant programs aimed at avoid- ing home mortgage foreclosures. Other transactions with financial institutions will, taken together, yield a net gain to the federal government, in CBO's estimation. CBO's current assessment of the cost of the TARP's trans- actions is $3 billion lower than the $24 billion estimate shown in the agency's previous report on the TARP Note: Numbers in the text and tables may not add up to totals because of rounding.

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