A Look Back At TARP's Successes, Failures
MARY LOUISE KELLY, Host:
From NPR News, this is ALL THINGS CONSIDERED. I'm Mary Louise Kelly.
ROBERT SIEGEL, Host:
Herb Allison oversaw TARP at the Treasury Department for the last 15 months, and he joins us now from our bureau in New York. Welcome to the program.
LOUISE KELLY: Thank you very much, Robert. Great to be here.
SIEGEL: This program is being vilified in this political campaign season by both Democrats and Republicans, and yet, by most accounts, it's been a financial success. How do you reconcile those two things?
LOUISE KELLY: And I think that, you know, it's hard to prove a negative. It's hard to really demonstrate what the economy would have been like if TARP had not been created. It kind of reminds me, though, of the movie "It's a Wonderful Life" because, as you recall, in the movie, George Bailey is shown what his hometown would have looked like had he not lived, and things were pretty tough.
SIEGEL: Do you think America would have been reduced to a national Potterville or Pottersville if there have been no TARP?
LOUISE KELLY: It might well have. In fact, there is an attempt to illustrate what the country might have looked like without TARP, and that's the study done by Alan Blinder and Mark Zandi where they indicated without TARP and some associated programs, you might have seen unemployment at 16 percent or more, and the economy literally grinding to a halt.
SIEGEL: Let's talk about the actual numbers here. The original $700 billion, that amount was never actually spent. It was capped at $475 billion, is that right?
LOUISE KELLY: Yes. And, in fact, only about $387 billion was actually invested. And I'm very pleased that at this point we've already recovered more than half of the funds that were invested. We're now down to about $180 billion. And three-fourths of the money that was invested in banks has been returned, and the government - the taxpayer in other words - will earn a profit on the money that was invested in banks.
SIEGEL: Eighty-two billion dollars went to the auto industry, to Chrysler and GM. Money also went to their financial arms and to auto suppliers. How much of that money will be recouped ultimately?
LOUISE KELLY: Well, we've already received some of that money back to taxpayers. And, as you know, GM has announced it intends to do its initial public offering as a new company in November, and that will pave the way for the government to sell its common stock ownership in GM over the next several years. And we expect that we'll recover the large portion of that funds, if not perhaps all the funds, over a period of time.
SIEGEL: Although at the moment, the GM public offering, it hasn't yet taken place, but it looks like the value of the company is a little bit less than had been hoped for.
LOUISE KELLY: That could be. We'll see what the market is like when the actual offering takes place, but we're hopeful that the public will receive most of the money back and perhaps all of it.
SIEGEL: Again, the biggest share of the money went to the banks, but there was also $70 billion that went to the insurance giant AIG. Any hope of actually seeing that money back?
LOUISE KELLY: Well, as we're reporting today in a two-year retrospective on the TARP program, if you valued our stake in the company at the current market value of the firm, we ought to get back all of the money on behalf of taxpayers and perhaps earn a profit.
SIEGEL: I've seen it claimed that perhaps the real net cost to taxpayers from all this, it's far from that original $700 billion that was never spent, it's more like $50 billion?
LOUISE KELLY: Yes. And if you look at the Treasury's overall holdings, including TARP and some other holdings with AIG, the total cost to Treasury may be as low as $30 billion.
SIEGEL: What do you make of this? I mean, you, first of all, I should point out, you were a holdover from the Bush administration. You were a former financial chair for John McCain's first presidential run. You're not a partisan Democrat by any means. Do you think part of the problem was that the big banks seemed to recover all too quickly? That is, given the size of the effort, they were, within a matter of a few months, saying, ah, we're up and running. We're okay. People who lost the jobs, people who are underwater on their mortgages, people who saw their 401ks drop by huge amounts are still struggling terribly and making all sorts of deep cuts in their own finances to make it work. In a sense, the success of the TARP seems almost, you know, to thumb Washington's nose at people out there.
LOUISE KELLY: People are still suffering out there. They still need assistance. And it's also going to take time to rebuild confidence. This is going to be most likely a fairly slow recovery. That's frustrating to everyone, including everyone in the administration who are working - take it from me, I've been there night and day - to try to make things better for Americans.
SIEGEL: Herb Allison who oversaw the Troubled Asset Relief Program - the TARP - at the Treasury until just a few days ago.
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