Are You Kidding? CBO's Laughable TARP Claims

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The Congressional Budget Office has released its first statutory report on transactions under the Troubled Asset Relief Program (TARP). It appears the government managed to spend $247 billion in cash under TARP through December 31st. But this is not Washington’s only “accomplishment.” The bureaucrats score major points for creativity as well. Consider CBO’s attempt to portray more than $180 billion of the bailout as something other than a subsidy:

[TARP] transactions totaled $247 billion. Valuing those assets using procedures similar to those specified in the Federal Credit Reform Act (FCRA), but adjusting for market risk as specified in the EESA, CBO estimates that the subsidy cost of those transactions (broadly speaking, the difference between what the Treasury paid for the investments or lent to the firms and the market value of those transactions) amounts to $64 billion.

As the following table shows, the CBO claims that only about $5 billion of the $20 billion it gave to Citigroup was a subsidy. Even more stunningly, of the $178 billion the government has given away to 214 different institutions, only $32 billion is considered a subsidy. The other $146 billion is “market value.” Of course, if the latter amount really reflected the fair market value of what the government received in exchange for its cash, those 200+ institutions would not have needed a government bailout in the first place.

Here is the CBO’s accounting:

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Not only is the CBO’s accounting tortured, but it is also rather “high level.” The CBO provides no detail behind the estimates shown above. We wonder why.

One thing appears certain: If the CBO can declare that more than $180 billion of the government’s $247 billion spent in TARP funds is not a subsidy, there is little reason to believe the government will not keep spending at a furious pace. After all, it can count on the CBO to keep supplying some of the world’s most creative accountants.