TARP revisited

TARP, or the Troubled Asset Recovery Program, was the controversial $700 billion program passed in the fall of 2008 to assist the banking system.  It was a political hot potato in many races this year. As an investment, how did the government do on the TARP? N.C. Cooperative Extension economist Mike Walden answers.

“Actually … fairly well, although it is important to know that TARP went to more than just the banks. In fact, $250 billion did go to the banks, and actually to date all of that money has been paid back — all of it. And, in fact, more has been paid back; the government has made a profit of $16 billion dollars on that part of TARP that went to the banks.

“Now TARP went to other entities: $80 billion has gone to the auto companies. About two-thirds of that has been repaid. The expectation is that more of that will be repaid down the road. Seventy billion dollars went to financial insurance companies; all but about $10 billion of that is expected to be repaid. Thirty billion went to struggling homeowners; none of that is expected to be repaid. But the big question there, I think, is what would have happened to the banks without that assistance?

“So, overall, TARP actually performed, I think, according to expectations. It was viewed as a stop gap. We needed to do something fast to help the financial system. We needed to put money into the financial system to prop it up. The expectation was when the financial system would get better, it would be repaid. And I think TARP is moving along with those expectations.”

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