Losses for TARP Less Than Expected

TARP, otherwise known as the Troubled Asset Relief Program, was a program developed in 2008 to strengthen market stability, improve the strength of financial institutions, and enhance market liquidity in the United States to ensure the health of the U.S. economy. Initially, it was a voluntary Capital Purchase Program which was intended to build capital to increase the flow of financing to U.S. businesses and consumers and was developed as a response to the sub-prime mortgage crisis which was realized in 2008 and in to 2009.

Through TARP, the United States Department of the Treasury was licensed to purchase or insure up to $700 billion of "troubled assets" which included but were not necessarily limited to commercial or residential mortgages (issued on or before March 14, 2008) as well as insurance and other instruments related to these mortgages, as well as any other financial instruments deemed appropriate to encourage financial market stability.

Up until now, just a fraction of the $581 billion originally pumped in to various U.S. companies has been repaid, but fortunately, that figure isn't going to last for too much longer. American International Group (AIG) is in the process of raising $35.5 billion from the sale of two of it's large life-insurance units. One of these companies, American International Assurance Ltd. is being sold to Prudential PLC, and the other unit, American life Insurance Co. is projected to be sold to MetLife Inc. for $15 billion. Despite the positive outlook on these sales, AIG is still projecting that it will take several years to repay TARP for the balance of monies received.

In addition, $28 billion of TARP funds are projected to continue to be outstanding due to loans given to auto companies that will not be repaid. Unfortunately, another $2.33 billion that was loaned to CIT Group Inc. will also not be repaid because that organization filed for bankruptcy in 2009.

On a positive note, U.S. banks have, on the whole, paid back their TARP monies the most quickly of any sector. Of the $245 billion invested in banks, nearly 70% (or $170 billion) has been paid back by 71 different financial institutions.

"Troubled Asset Relief Program". http://en.wikipedia.org/wiki/Troubled_Asset_Relief_Program

"TARP Losses Revised DOwn, to $117 Billion". http://online.wsj.com/article/SB10001424052748704358004575096044265249772.html?mod=dist_smartbrief

"Troubled Asset Relief Program (TARP) Information". http://www.federalreserve.gov/bankinforeg/tarpinfo.htm