Geithner: TARP Will Cost Much Less Than Expected

He claimed the cost of TARP is likely to be no greater than the amount spent on the program’s housing initiatives.  The remainder of the investment programs under TARP – in banks, AIG, credit markets, and the auto industry – will likely, in the aggregate, ultimately yield a positive return for taxpayers. 

He further discussed the cost of the government’s broader response efforts in relation to past government intervention, which “is remarkably low when compared to past systemic crises.”

“An IMF study found that the average net fiscal cost of resolving roughly 40 banking crises since 1970 was 13% of GDP,” Geithner said.  “The GAO estimates that the cost of the U.S. Savings and Loan Crisis was 2.4% of GDP.  In contrast, the direct fiscal cost of all our interventions, including the actions of the Federal Reserve, the FDIC, and our efforts to support the GSEs is likely to be less than 1% of GDP. The true cost of this crisis to the economy, however – the jobs, wealth and growth that it erased – is much higher, but that damage would have been far worse without the government’s emergency response.”