Think last year’s $700 billion Wall Street rescue package was beaucoup bucks to spend bailing out the nation’s floundering financial system? That’s chump change compared to what the overall price tag could be, a government watchdog says.
The inspector general in charge of overseeing the Treasury Department’s bank-bailout program says the massive endeavor could end up costing taxpayers almost $24 trillion in a worst-case scenario. That’s more than six times President Obama’s proposed $3.55 trillion budget for 2010.
Much of the bailout’s attention has focused on the Treasury’s $700 billion Troubled Asset Relief Program, or TARP, which Congress hurriedly passed last fall. But about 50 other federal programs that began as early as 2007 could push the government’s total financial support of the private financial sector to at least $23.7 trillion, says TARP Special Inspector General Neil Barofsky.
The estimate - which the Treasury strongly disputes - was included in Mr. Barofsky’s second-quarter review of TARP on Monday.
“TARP does not function in a vacuum, but is rather part of the broader government efforts to stabilize the financial system,” said Mr. Barofsky in a statement ahead of his appearance Tuesday before the House Oversight and Government Reform Committee to discuss his report.
Extra costs include $2.3 trillion in programs offered by the Federal Deposit Insurance Corp. (FDIC), $7.4 trillion in TARP and other aid from the Treasury, and $7.2 trillion in federal money to support Fannie Mae, Freddie Mac, credit unions, Veterans Affairs and other federal guarantee programs, he said.
The committee’s top Republican, Rep. Darrell Issa of California, said the size and scope of the government’s involvement in rescuing the struggling financial sector has reached a mind-boggling level.
“If you spent a million dollars a day going back to the birth of Christ, that wouldn’t even come close to just $1 trillion; $23.7 trillion is a staggering figure,” he said.
But the Treasury called Mr. Barofsky’s estimate “inflated,” saying that less than $2 trillion have been doled out to so far by all the programs he identified in the report.
The estimate also doesn’t take into account the the repayment of TARP loans, the Treasury says, an increasing tally that so far has reached about $70 billion.
The Treasury has committed $643.1 billion of TARP money and has spent $441 billion.
In the nine months since Congress authorized TARP, the Treasury has created 12 programs involving funds that may reach almost $3 trillion, Mr. Barofsky said.
Although the Treasury is only authorized to spend the $700 billion approved last year by Congress and signed by President George W. Bush, the FDIC and the Federal Reserve are expected to invest up to $1 trillion each in partnering with the Treasury on TARP.
Mr. Barofsky complained that while the Treasury has taken some steps toward improving transparency in TARP programs, it repeatedly has failed to adopt many recommendations that his office considers essential to providing “the highest degree of accountability and transparency possible.”
The Treasury for months has refused his recommendation that TARP recipients be required to reveal exactly what they do with the money, a practice that the Treasury has called “meaningless” in light of the inherent “fungibility” of money.
Oversight committee Chairman Edolphus Towns said he was disappointed that the Treasury hasn’t done more to increase transparency, adding that Mr. Barofsky’s report “demonstrates more than anything why we need” a TARP watchdog.
“If the banks can’t tell us how they’re spending TARP money, then maybe they shouldn’t have it,” the New York Democrat said. “How can Treasury commit billions - and potentially trillions - of taxpayer dollars, but not ask recipients what they’re doing with the money? That takes ‘burying your head in the sand’ to a new level.”
The report also shows that the inspector general’s office authorized 35 criminal and civil investigations involving TARP money through June 30. These investigations include suspected accounting fraud, securities fraud, insider trading, mortgage-service misconduct, mortgage fraud, public corruption, false statements and tax investigations.
Mr. Barofsky told The Washington Times earlier this month that “almost certainly we are going to be seeing a number of [criminal] indictments” coming from the investigations.