The Financial Crisis Response In Charts

April 2012

Response

Cost

Reform

Challenges

Introduction
his week, the U.S. Department of the Treasury released its latest cost estimates for the Troubled Asset Relief Program (TARP), which was only one part of the governments broader effort to combat the nancial crisis. These charts provide a more comprehensive update on the impact of the combined actions of the Treasury, the Federal Reserve, and the Federal Deposit Insurance Corporation (FDIC).* Collectively, these programscarried out by both a Republican and a Democratic administrationwere effective in preventing the collapse of the nancial system, in restarting economic growth, and in restoring access to credit and capital. They were well-designed and carefully managed. Because of this, we were able to limit the broader economic and nancial damage. Although this crisis was caused by a shock larger than that which caused the Great Depression, we were able to put out the nancial res at much lower cost and with much less overall economic damage than occurred during a broad mix of nancial crises over the last few decades. Our economy is stronger today because of the strategy we adopted and the nancial reforms now being put in place. This, in turn, has allowed our nancial system to return as an engine for economic growth, jobs, and innovation. These are the most important measures of the impact of the nancial strategy adopted by the United States. In addition, the latest available estimates indicate that the nancial stability programs are likely to result in an overall positive nancial return for taxpayers in terms of direct scal cost. These estimates are based on gains already realized and on a range of different measures of cost and return for the remaining investments outstanding. These estimates do not include the full impact of the crisis on our scal position. And they do not include the cost of the tax cuts and emergency spending programs passed by Congress in the Recovery Act and after that were critically important to restarting economic growth. Although the economy is getting stronger, we have a long way to go to fully repair the damage the crisis has left behind. We are still living with the broader economic cost of the crisis, which can be seen in high unemployment, the moderate pace of recovery, scal de cits still swollen by the crisis, the remaining constraints on access to credit, and the remaining challenges in the housing market. But the damage would have been far worse, and the costs far higher, without the governments forceful response.
* This document focuses on many actions that made up the coordinated government response but is not meant to provide a complete inventory. In particular, while the Federal Reserve coordinates with other government agencies on some actions, it acts independently with regard to monetary policy.
U.S. DEPARTMENT OF THE TREASURY

1 This recession was the worst since the Great Depression

Real GDP, percent fall from pre-recession peak
0%
= trough

Response

Cost

Reform

Challenges

Metrics of the 07 - 09 nancial crisis, peak-to-trough:

-1%

-2% 2007 - 09 recession -3% 2001 recession 1990 - 91 recession 1981 - 82 recession -4% 1980 recession 1974 recession

8.8 million jobs lost $19.2 trillion lost household wealth

(2011 dollars)

-5%

-6% Pre-recession peak

1 Years since pre-recession GDP peak

Source: Bureau of Economic Analysis, Bureau of Labor Statistics, Federal Reserve Flow of Funds.

U.S. DEPARTMENT OF THE TREASURY

2 The crisis response helped restart economic growth

Real GDP growth, quarterly

Response

Cost

Reform

Challenges

2007

Mar. 3, 2009 TALF program launched to help revive credit markets Feb. 2009 Financial Stability Plan announced Recovery Act signed Housing programs announced
+1.7%

2008

Mar. 23, 2009 PPIP program announced to help revive mortgage nance market

2009

2010

2011

+3.6% +3.0%

+3.8% +3.9% +3.8% +3.0% +2.5% +2.3% +1.7% +0.4% -0.7% +1.8% +1.3%

Jan. 20, 2009 President Obama +1.3% takes of ce

+0.5%

-1.8%

Jun. 2009 First large banks repay TARP funds GM restructuring

-3.7%

Dec. 12, 2007 Fed establishes rst liquidity facility and currency swap lines with other central banks Mar. 2008 Bear Stearns collapses

May 7, 2009 Large bank stress test results released Apr. 2, 2009 G-20 nance ministers announce coordinated response to global nancial crisis

Jul. 7, 2008 FDIC intervenes in IndyMac Bank

-8.9%

-6.7%

Sept. 2008 Fannie Mae and Freddie Mac conservatorship Lehman Brothers bankruptcy AIG stabilization effort
Source: Bureau of Economic Analysis.

Oct. 3, 2008 TARP nancial stabilization package enacted

U.S. DEPARTMENT OF THE TREASURY

3 The crisis response paved the way for retirement savings to recover
1,600

Response

Cost

Reform

Challenges

2007

2008
S&P 500 index

2009

2010

2011

16,000

1,400

14,000

1,200

Mar. 2008 Bear Stearns collapses Sept. 2008 Fannie Mae/Freddie Mac conservatorship Lehman Brothers bankruptcy AIG stabilization effort Oct. 3, 2008 TARP nancial stabilization package passed Jan. 20, 2009 President Obama takes of ce Feb. 2009 Financial Stability Plan announced Recovery Act signed Housing programs announced Mar. 3, 2009 TALF program launched to help revive credit markets Jun. 2009 First large banks repay TARP funds GM restructuring May 7, 2009 Large bank stress test results released Apr. 2, 2009 G-20 nance ministers announce coordinated response to global nancial crisis

12,000

1,000

Retirement fund assets (billions of 2011 dollars)

10,000

800

8,000

600

6,000

400

4,000

200

Mar. 23, 2009 PPIP program announced to help revive mortgage nance markets

2,000

Source: Federal Reserve Flow of Funds.

U.S. DEPARTMENT OF THE TREASURY

4 The crisis response helped unclog the credit pipes of the

Net percentage of banks easing lending standards, by loan type
40

Response

Cost

Reform

Challenges

nancial system
The crisis response helped restart the markets that provide nancing for auto, credit card, mortgage, and business loans. For borrowers, it: Improved credit access Lowered borrowing costs.
How much has the price of credit recovered since the crisis? As measured by the return of yields of assetbacked securities to their pre-crisis levels

2006
More banks easing

2007

2008

2009

2010

2011

20

Mar. 3, 2009 TALF program launched Feb. 2009 Financial Stability Plan announced Recovery Act passed Housing programs announced Jan. 20, 2009 President Obama takes of ce

Mar. 23, 2009 PPIP program announced to help revive mortgage nance markets

-20

-40
More banks tightening

-60

Jun. 2009 First large banks repay TARP funds May 7, 2009 Large bank stress test results released Oct. 3, 2008 TARP enacted

Agency mortgages

100%

Auto loans

99%

-80

Commercial and industrial lending Residential mortgages Consumer credit cards

Credit cards

99%

-100
Source: Federal Reserve Senior Loan Of cer Opinion Survey, Treasury calculations.
U.S. DEPARTMENT OF THE TREASURY

5 The crisis response helped support families and businesses

What did it support?
Small business Autos Financial markets Consumers Retirement Housing

Response

Cost

Reform

Challenges

The Treasury Department, the Federal Reserve, and other federal agencies attacked the crisis on multiple fronts so that families could meet their nancial needs and businesses could obtain the credit they need to hire and grow.

Small businesses
Helped support companies that need credit to hire and grow.

Autos
Helped support a crucial manufacturing industry and save American jobs.

Financial markets
Helped restart credit markets and stabilize firms that hold deposits and provide credit.

Consumers
Helped support families that need auto, credit card, and student loans.

Retirement
Helped protect savers with 401(k) plans, money market funds, and other investments.

Housing
Helped support Americans seeking to obtain or refinance a mortgage, or avoid foreclosure.

This chart is intended to illustrate the breadth of the crisis response, but is not meant to be a complete depiction of all the actions taken by the government or their effects.
Source: Treasury, Of ce of Management and Budget.
U.S. DEPARTMENT OF THE TREASURY

6 The crisis response helped stabilize the housing market

The governments efforts helped keep mortgage rates low so that Americans could continue to buy homes and re nance in the wake of the crisis.
Conventional 30-year mortgage rates
7 percent 6 5 4 3 2 1 0 Jan '08 Jul '08 Jan '09 Jul '09 Jan '10 Jul '10 Jan '11

Response

Cost

Reform

Challenges

Jul '11

Jan '12

Since April 2009, loan modi cation programs have helped millions of borrowers stay in their homes, more than the number who have lost their homes to foreclosure.

Cumulative foreclosures and permanent modi cations started*

6 million 5 4 3 2 1
HAMP modifications FHA loss mitigation Since April 2009, there have been 5 million permanent loan modifications Private modifications
Foreclosure completions 2.6m

0 Apr '09 Jul '09 Oct '09 Jan '10 Apr '10 Jul '10 Oct '10 Jan '11 Apr '11 Jul '11 Oct '11 Jan '12

* Cumulative HAMP permanent modi cations, FHA loss mitigation (such as modi cations, partial claims, and forbearance plans), and early delinquency interventions, plus proprietary modi cations completed as reported by the HOPE NOW Alliance. Some homeowners may be counted in more than one category. Foreclosure completions are properties entering Real Estate Owned (REO) as reported by Realty Trac. This does not include other loss mitigation actions taken under Treasury housing programs or by the GSEs, such as forbearance plans, short sales, and second lien modi cations, which would increase the totals.

Source: Federal Reserve, HOPE NOW, Department of Housing and Urban Development.

U.S. DEPARTMENT OF THE TREASURY

7 The crisis response saved the auto industry and one million American jobs
According to independent estimates, the rescue of the auto industry saved more than one million American jobs. Since the rescue, the auto industry has added more than 230,000 jobs. The auto industry rescue is currently estimated to cost about $22 billion, but the cost of a disorderly liquidation to families and businesses across the country that rely on the auto industry would have been far higher.
Source: Bureau of Labor Statistics, Autodata.

Response

Cost

Reform

Challenges

Auto-industry employment

2.5 auto industry workers 2.6m

auto jobs since June 2009

2.4

+231,000

Mar. 2009 President Obama rejects restructuring plans from GM and Chrysler, challenging them to develop more aggressive plans to return to viability.
Sales of motor vehicles in the U.S.

2.3

13m 10m

12m

13m

14.5m

After June 2009 Post-restructuring of GM and Chrysler

2008

2009

2010

2011

2012 (annualized average to date)

2.2 Jan 2009 '10 '11 '12

U.S. DEPARTMENT OF THE TREASURY

8 The crisis response curbed the damage and helped restart the economy
Jobs are returning. Despite the size of the nancial shock, the speed and force of the response helped restore job growth more quickly than in most other recent crises. There is still more work ahead, but businesses have...

Response

Cost

Reform

Challenges

Total civilian employment, percentage change from pre-crisis peak

+20%
Jobs growth resumed much faster than average of other recent nancial crises in advanced economies

+10%

0%

U.S. 2008-09 financial crisis

Average of 5 most recent advanced economy financial crises

-10%

Added workers over the last 25 straight months. Created 4.1 million jobs.

-20% U.S. Great Depression -30% Pre- 1 crisis peak 2 3 4 5 6 7 8 9 10 11 12 13 14

Spain 1974 Norway 1986 Finland 1989 Sweden 1989 Japan 1991

15

16

17

18

19

20

Years since pre-crisis employment peak

Source: Treasury analysis based on OECD and U.S. Census data.
U.S. DEPARTMENT OF THE TREASURY

9 How much were the

Response

Cost

Reform

Challenges

nancial stability programs expected to cost?

Projections of potential cost of nancial stability programs

$7.7

Bank bailout could cost

Estimated cost of TARP

$4

trillion
CNNMoney.com January 27, 2009

$341
Estimated cost of TARP

billion

Office of Management and Budget, August 2009

U.S. pledges top

trillion

$356

billion

Congressional Budget Office, March 2009

to ease frozen credit Bloomberg November 24, 2008

IMF March 2009 estimate of the cost of U.S. response to 08-09 crisis

Source: See Notes.

Fannie, Freddie bailout could cost taxpayers

$1

12.7% of GDP ($1.9 trillion in 2011$)

Estimated total potential exposure from financial rescue

trillion

The Christian Science Monitor June 18, 2010

$24

trillion

Special Inspector General for TARP, July 2009

U.S. DEPARTMENT OF THE TREASURY

10 In fact, taxpayers may realize a gain

Response

Cost

Reform

Challenges

Projections of nancial stability program returns/costs, based on latest estimates

Overall, the government is now expected to at least break even on its nancial stability programs and may realize a positive return. Treasurys TARP investments and overall stake in AIG, purchase of mortgage-backed securities, and Money Market Fund guarantee program are each currently expected to realize an overall positive return for taxpayers. Additionally, the Federal Reserve is remitting signi cant excess earnings to the Treasury. There are a range of estimates on the ultimate cost of TARPs foreclosure prevention programs and stabilizing Fannie Mae and Freddie Mac, which will depend upon future housing market conditions and other factors. However, the overall positive returns from the other nancial stability programs are currently expected to more than offset those costs, according to the latest estimates.

+$179b +$1b
Treasury money market fund guarantee program Federal Reserve excess earnings**

Treasury TARP investment programs Other Treasury and additional AIG holdings +$2b -$16b
CBO estimate

TARP housing programs

-$46b
OMB estimate

+$25b
Treasury MortgageBacked Securities Purchase Program

-$28b
OMB projection of net cost through FY2022

Fannie Mae/ Freddie Mac conservatorship*

-$151b
Current net cost

* Treasury currently has a net investment of $151b in Fannie Mae and Freddie Mac, which is expected to be reduced over time as those rms generate positive earnings. OMB projects the eventual cost to fall to $28b by scal year 2022. This estimate however could change materially depending on future changes in home prices, enterprise market share, and other operating assumptions. ** Treasury estimates. Based on the Presidents FY2013 Budget, the Federal Reserve has already remitted $82 billion in excess earnings above what would be expected in normal times to the Treasury through scal year 2011. Total excess earnings from the Federal Reserve to be remitted to the general fund are currently forecast to reach $179 billion through scal year 2015. The amount of future Federal Reserve earnings is uncertain and will depend on future nancial, economic, and market conditions. Note: Estimates are most recently available as of publication and are subject to revision based on future market conditions. Chart includes income and costs for the nancial stability programs only. It does not include gures related to the Recovery Act or tax revenues lost from the crisis.

Source: Treasury, Of ce of Management and Budget. See Notes for further details on calculations.

U.S. DEPARTMENT OF THE TREASURY

11 The projected cost of TARP has fallen signi cantly

Projections of TARP programs and additional Treasury AIG holdings, gain (cost)
+$50 billion 50 0 -50 -100 -150 -200 -250 -300 -350 -$291b -$341b
POSITIVE RETURN LOSS

Response

Cost

Reform

Challenges

Investment programs only (excludes housing)*

+$2b

The projected cost of TARP has fallen signi cantly over the last three years. TARPs investment programs, together with Treasurys additional stake in AIG, are currently expected to realize a positive return for taxpayers. The remaining projected cost is primarily attributable to support for struggling homeowners; these funds were not intended to be recovered.

-$60b

TARP overall

83%
decrease in projected TARP costs since Aug. '09

-$400 billion loss -400 Aug. 2009 Mid-session Review

Feb. 2010 President's Budget

Feb. 2011 President's Budget

Feb. 2012 President's Budget

Apr. 2012 estimate

* This represents the TARP investment programs and includes Treasurys additional AIG common stock holdings valued as of February 29, 2012. It excludes foreclosure prevention funds, which were not intended to be recovered ($46B). ** GAO annually reviews Treasury TARP cost estimates.
Source: Treasury, Of ce of Management and Budget.

TARP programs have received three straight clean audits.**

U.S. DEPARTMENT OF THE TREASURY

12 The bank investment program helped stabilize the

Outstanding bank program investments, principal $300 billion 300

Response

Cost

Reform

Challenges

nancial system
TARPs bank investment programs helped stabilize the nancial system by providing capital to more than 700 banks throughout the country. More than 450 were small, community banks. Treasury is continuing to wind down those investments, which have already realized a signi cant return for taxpayers.
U.S. DEPARTMENT OF THE TREASURY

Returns as of April 12, 2012

+$19b
$245b
positive return

$264b
Realized income $34b

250

200

150
Repayments $230b

100
Federal Reserve regulatory minimum on stress tests

50

Oct '08 Apr '09 Oct '09 Apr '10 Oct '10 Apr '11 Oct '11 Apr '12
Disbursed Recovered

Note: About $2b of the funds invested in banks re nanced into the SBLF program. This re ects less than 1% of the total TARP funds invested in banks.

A total of 348 banks remain in TARPs Capital Purchase Program and 82 banks remain in TARPs Community Development Capital Initiative

Source: Treasury.

13 The crisis response helped prevent the collapse of the

$182b

Response

Cost

Reform

Challenges

nancial system and stabilized AIG

Total commitment (Treasury and Federal Reserve), outstanding investment, and value of ownership stake in AIG, billions of dollars

76%
of maximum committment returned or cancelled to date

Based on current market prices, the government is expected to realize a gain on its AIG investment

$61b $44b

Interest/ Fees/Gains Realized to Date $12b

Current Value of Remaining Government Stake $49b Max. commitment March 2009 Remaining investment outstanding Remaining Investment Outstanding As of March 2012 Value of remaining Stake Value of Remaining stake As of March 2012

Source: Treasury, Federal Reserve.

U.S. DEPARTMENT OF THE TREASURY

14 The
14 percent 12

Response

Cost

Reform

Challenges

nancial industry is less vulnerable to shocks than before the crisis

Short-term wholesale funding as a percent of assets, 4 largest U.S. banks
40 percent

Capital in bank holding companies as a percentage of risk-weighted assets

35
Other Tier 1 Tier 1 Common

30

10

Banks have added nearly $400 billion in fresh capital as a cushion against unexpected losses and nancial shocks. Banks are also less reliant on short-term funding, which can disappear in a crisis and leave them more vulnerable to panics.

25
8

20
6

15
Federal Reserve regulatory minimum on stress tests

10
2

0 2002 '03 '04 '05 '06 '07 '08 '09 '10 '11 Q1
Source: Federal Reserve form Y-9C, Treasury calculations.

0 2002 '03 '04 '05 '06 '07 '08 '09 '10 '11 Q1
U.S. DEPARTMENT OF THE TREASURY

15 The U.S. banking system is proportionally smaller than that of other advanced economies
Even with the consolidation of some of the weakest players during the crisis, the United States has... the least concentrated banking system of any major economy. the smallest banking system relative to the size of its economy. The new legal tools established by the DoddFrank Act mean that regulators will be better able to dismantle and resolve large nancial institutions if necessary.
Source: BankScope, IMF, Federal Reserve Flow of Funds.

Response

Cost

Reform

Challenges

Total assets of commercial banks, percent of GDP

600%

United Kingdom
500%

Switzerland
400%

Netherlands France Belgium Sweden

300%

200%

100%

Canada Japan Germany Italy United States

0% 0% 100% 200% 300% 400% 500% 600%

Total assets of 4 largest commercial banks, percent of GDP

U.S. DEPARTMENT OF THE TREASURY

16 The economy still has far to go to fully recover from the

Unemployment rate, percent of the labor force
12 percent 12
Recessions

Response

Cost

Reform

Challenges

nancial crisis

10 8 6 4 2 0 Jan 2006 '07 '08 '09 '10 '11 '12

Long-term unemployment rate (27+ weeks) Unemployment rate

Unemployment has fallen, but it still remains high.

Real output gap

15 $15 trillion 14
Recessions

Real potential GDP (2005 dollars)

output gap in 2011Q4

5.5%

13 12 11 10 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09

Real GDP (2005 dollars)

Economic output remains well below its potential.

'10

'11
U.S. DEPARTMENT OF THE TREASURY

Source: Bureau of Labor Statistics, Congressional Budget Of ce.

17 The longstanding
160 percent 140
Recessions

Response

Cost

Reform

Challenges

nancial dif culties facing households persist

Household debt is down relative to income, but a large overhang of debt remains.

Household debt, percent of disposable income

120 100 80 60 40 20 0 1980 Q1 '85 '90 '95 '00 '05 '10

Real median household income

$ 60,000
Recessions

1999: $53,252

55,000

Median household income has declined over the last decade.

50,000
2010: $49,445

45,000

40,000 1967 '72 '77 '82 '87 '92 '97 '02 '07
U.S. DEPARTMENT OF THE TREASURY

Source: Federal Reserve Flow of Funds, U.S. Census.

18 The housing market remains a challenge

Inventory of vacant homes for sale only
2.5 million
Recessions

Response

Cost

Reform

Challenges

2.0 1.5 1.0 0.5 0 2004 Q1 '05 '06 '07 '08 '09 '10 '11

Inventories of unsold homes are declining, but slowly. The overhang from the crisis continues to weigh on prices.

New single-family home sales

1.6 million
1.4 million Jul. 2005
Recessions

1.2 0.8 0.4 0 Jan 2003

Source: U.S. Census.
313,000 Feb. 2012

New home sales are stabilizing, but the housing market remains weak.

'04

'05

'06

'07

'08

'09

'10

'11

'12
U.S. DEPARTMENT OF THE TREASURY

19 The federal budget de cit must be reduced to begin paying down debt
$8 trillion 8 6

Response

Cost

Reform

Challenges

Causes of the difference between projected and actual cumulative budget surpluses/de cits, scal years 2001 - 2011

In January 2001, CBO projected cumulative surpluses would total $5.9 trillion through 2011.
COSTS NOT DUE TO LEGISLATION (technical & economic)

Jan. 2001 - Jan. 2009 Policies -$7 trillion

through 2011

29%
Tax Cuts -$3,000b Other annual appropriations -$1,700b

2
CUMULATIVE SURPLUS

0
CUMULATIVE DEFICIT

Cost of January 2001 January 2009 policies

59%

-2
Cost of postJanuary 2009 policies

Iraq and Afghanistan -$1,400b Medicare Part D benefit -$300b Other -$600b

-4

Post-January 2009 Policies -$1.4 trillion

-6

Instead, cumulative deficits have totaled $6.0 trillion.

2001 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11

12%

through 2011

Recovery Act -$800b Other -$410b December 2010 tax deal -$250b

-8

Source: Treasury analysis of Congressional Budget Of ce data. See Notes for more details.

U.S. DEPARTMENT OF THE TREASURY

Response

Cost

Reform

Challenges

Notes
Bankruptcies, 17 November 2010. Available at http://www.cargroup.org/assets/ les/bankruptcy.pdf Chart 8 Average of 5 most recent advanced economy nancial crises includes Spain (indexed to 1974Q2), Norway (1986Q4), Finland (1989Q3), Sweden (1989Q4), and Japan (1991Q1). Advanced country nancial crises selected based on Reinhart & Rogoff 2009 and indexed to pre-crisis civilian employment peak based on OECD Outlook data. U.S. employment data for the Great Depression series comes from the U.S. Census Historical Statistics of the United States: Colonial Times to 1970, Table A-3. sid=an3k2rZMNgDw&pid=newsarchive Congressional Budget Of ce, A Preliminary Analysis of the Presidents Budget and an Update of CBOs Budget and Economic Outlook, Mar. 2009, p8. Available at http://www.cbo.gov/ftpdocs/100xx/doc10014/03-20PresidentBudget.pdf

Chart 1 Household wealth measured as net worth of households in the Flow of Funds. Adjusted to 2011 dollars using the personal consumption expenditures chain price index. Chart 3 Retirement fund assets measured as pension fund reserves held as assets by households in the Flow of Funds. Adjusted to 2011 dollars using the personal consumption expenditures chain price index. Chart 4 Mortgage price of credit measured by spread between jumbo and conventional mortgages. Credit cards measured by the 3 year spread-to-swap of xed AAA. Autos measured by the 3 year spread-to-swap of prime xed AAA. Chart 7 Auto industry employment includes all payrolls in retail motor vehicle and parts dealers, both in the manufacturing and service sectors. White House, The Resurgence of the American Automotive Industry, June 2011. Available at http:// www.whitehouse.gov/sites/default/ les/uploads/ auto_report_06_01_11.pdf Center for Automotive Research, The Impact on the U.S. Economy of the Successful Automaker

Resolution Trust Corporations 1994 and 1995 Financial Statements, 1996, p13. Available at http://
www.gao.gov/archive/1996/ai96123.pdf.

Government Accountability Of ce, Financial Audit:

Of ce of Management and Budget, Presidents Chart 9 FY2013 Budget, Analytical Perspectives, p39. CNN Money, http://money.cnn.com/2009/01/27/news/ Available at http://www.whitehouse.gov/sites/default/ bigger.bailout.fortune/ les/omb/budget/fy2013/assets/spec.pdf International Monetary Fund, The State of Public Finances: Outlook and Medium-Term Policies After the Chart 10 2008 Crisis, at p17, available at http://www.imf.org/ Data re ect latest available estimates in each external/np/pp/eng/2009/030609a.pdf category. Gain or positive return de ned as cash received (whether as principal, interest, dividends, or Special Inspector General for TARP, Quarterly Report other) exceeds cash disbursed, regardless of the timing to Congress, July 21, 2009, http://www.sigtarp.gov/ of collection. reports/congress/2009/ July2009_Quarterly_Report_to_Congress.pdf TARP housing program gures re ect estimates as of February 2012. Of ce of Management Budget Christian Science Monitor, http://www.csmonitor.com/ projections assume that the $46 billion in funds Business/new-economy/2010/0618/Fannie-Freddiecommitted through TARPs foreclosure prevention bailout-could-cost-taxpayers-1-trillion programs to help struggling homeowners will be spent. Congressional Budget Of ce projections re ect Bloomberg, http://www.bloomberg.com/apps/news?
U.S. DEPARTMENT OF THE TREASURY

Response

Cost

Reform

Challenges

Notes
$225 billion in MBS and recovered $250 billion federal budget. Excess earnings re ect earnings on loans and asset purchases made by the Federal through principal and interest payments, and sales. Reserve through extraordinary programs established to The ultimate cost of Fannie Mae and Freddie Mac mitigate the nancial crisis. Treasury assumes earnings conservatorship, which was necessary to keep will converge to normalized levels by scal year 2015. mortgage credit available in the wake of the crisis, will The Federal Reserve generates signi cant income on depend on housing market conditions over time as its assets during normal times, the majority of well as how the agencies are wound down. The $28 which it remits to Treasury. For example, in 2006, billion amount is the net cost to Treasury through prior to the nancial crisis, the Federal Reserve 2022 as projected by the Of ce of Management and remitted $30 billion of such earnings. To estimate Budget for the purposes of the Presidents FY2013 excess earnings, Treasury calculates a normalized path Budget. The current net cost is $151 billion. Fannie of earnings from 2006 through 2015. Treasury Mae and Freddie Macs losses are primarily the result assumes earnings would have increased at a uniform of loans written before the crisis. OMBs estimate rate from 2006 to the level projected by the assumes that Fannie Mae and Freddie Mac will Presidents FY2013 Budget for scal year 2015. The generate positive earnings from the run off of their amount of future Federal Reserve earnings is uncertain more conservative post-crisis book of business to help and will depend on future nancial and economic conditions. pay back taxpayers. Treasurys estimate of Federal Reserve excess earnings is based on calculations from the Presidents FY2013 Budget, released in February 2012. The Federal Reserve has already remitted $82 billion in excess earnings above what would be expected in normal times to the Treasury through scal year 2011. Total excess earnings from the Federal Reserve expected to be remitted to the general fund are currently forecast to reach $179 billion through scal year 2015. The amount of future Federal Reserve earnings is uncertain and will depend on future nancial and economic conditions. The FDIC currently expects that fees paid by participating institutions will cover any losses associated with its bank debt insurance program put in place during the crisis, known as the Temporary Liquidity Guarantee Program (TLGP). Any excess proceeds from TLGP are remitted to the FDICs Deposit Insurance Fund (DIF). The DIF, which helps protect savers, is funded through assessments on insured depository institutions. The FDIC has not drawn upon its Treasury line of credit for the DIF.

a cost of $16 billion for these programs. TARP housing program funds are not intended to be recovered. http://www.cbo.gov/sites/default/ les/cbo les/ attachments/03-28-2012TARP.pdf TARP investment programs and additional Treasury holdings in AIG re ect market values and realized gains as of February 29, 2012. The estimated lifetime return of $22 billion on TARPs bank investment programs and more than $2 billion return on TARPs credit market programs are expected to more than offset the $22 billion expected cost of the auto industry rescue. Treasurys investment in AIG (which includes both TARP and non-TARP shares) is expected to at least break even at current market prices. See the latest 105(a) report for further details on TARP cost estimates: http://www.treasury.gov/ initiatives/ nancial-stability/brie ng-room/reports/105/ Documents105/March%2012%20Report%20to% 20Congress.pdf Treasury money market fund guarantee purchase program re ects realized gains as of the close of the program in September 2009. Treasury incurred no losses under this program and earned approximately $1.2 billion in participation fees. Treasury mortgage-backed security program re ect realized returns as of the close of the wind down of the program in March 2012. Those positive returns totaled $25 billion. Overall, Treasury invested

Chart 11 Methodology: Treasury estimates re ect excess See the latest 105(a) report for further details on TARP cost estimates: http://www.treasury.gov/initiatives/ earnings from the Federal Reserve applied to the
U.S. DEPARTMENT OF THE TREASURY

Response

Cost

Reform

Challenges

Notes

nancial-stability/brie ng-room/reports/105/ Documents105/March%2012%20Report%20to% 20Congress.pdf Chart 13 See the latest 105(a) report for further details on TARP cost estimates: http://www.treasury.gov/initiatives/ nancial-stability/brie ng-room/reports/105/ Documents105/March%2012%20Report%20to% 20Congress.pdf Chart 15 Four largest U.S. banks by assets are JPMorgan Chase, Bank of America, Citigroup, and Wells Fargo. Chart 19 Based on data from three annual Congressional Budget Of ce publications: the Budget and Economic Outlook, the update to the Outlook, and CBOs estimate of the Presidents Budget. Technical and economic factors include all changes in de cit projections not due to the cost of new legislation, including updates to economic and demographic projections. Post-January 2009 policies only re ects the effect of policies, including temporary policies, through 2011. Does not re ect the de cit reduction proposed in the Presidents FY2013 Budget going forward. Numbers may not sum due to rounding.

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