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Report on the Troubled Asset Relief Program June 2017 1 (June 23, 2017)

handle is hein.congrec/cbo3573 and id is 1 raw text is: JUNE 2017 Report on the Troubled Asset Relief Program- June 2017 In October 2008, the Emergency Economic Stabiliza- tion Act of 2008 (Division A of Public Law 110-343) established 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 leg- islation, 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 to prepare its own assessment of the TARP's costs within 45 days of the issuance of OMB's report. That assessment must discuss three elements: 0 The costs of purchases and guarantees of troubled assets, M The information and valuation methods used to calculate those costs, and 0 The impact on the federal budget deficit and debt. 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 purchase 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. Sec. 3 of the Emergency Economic Stabilization Act of 2008, PL. 110-343, 122 Stat. 3767. 2. Originally, the law required OMB and CBO to submit semiannual reports. That provision was changed to an annual reporting requirement by P.L. 112-204. OMB's most recent report on the TARP was submitted on May 23, 2017, as part of the Budget of the United States Government, Fiscal Year 2018: Analytical Perspectives, pp. 231-240, www.whitehouse.gov/omb/ budget/AnalyticalPerspectives. To fulfill its statutory requirement, CBO has prepared this report on the TARP's transactions that were com- pleted, outstanding, or anticipated as of May 31, 2017. By CBO's estimate, $445 billion of the initially autho- rized $700 billion will be disbursed through the TARP, including $438 billion that has already been disbursed and $8 billion in additional projected disbursements. CBO's current estimate of the cost to the federal gov- ernment of the TARP's transactions (also referred to as the subsidy cost)-which accounts for the realized costs of completed transactions and the estimated costs of outstanding and anticipated transactions-amounts to $33 billion (see Table 1). The estimated cost of the TARP stems largely from assistance to American International Group (AIG), aid to the automotive industry, and ongoing grant programs aimed at avoiding foreclosures on home mortgages. Taken together, other transactions with financial institu- tions have yielded a net gain to the federal government, in CBO's estimation. CBO's current assessment of the cost of the TARP's transactions is $3 billion higher than the $30 billion estimate shown in the agency's previous report on the TARP (issued in March 2016).3 That increase in the estimated cost stems from an increase in projected disbursements for mortgage programs. CBO's current estimate for all TARP transactions is slightly greater than OMB's latest estimate of $32 billion because CBO projects a slightly higher cost for those mortgage programs. When the TARP was created, the U.S. financial system was in a precarious condition, and the transactions 3. See Congressional Budget Office, Report on the TroubledAsset ReliefProgram-March 2016 (March 2016), www.cbo.gov/ publication/5 1378. Note: Numbers in the text and tables may not add up to totals because of rounding.

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