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The Death of Bailouts?

Ilan Moscovitz
September 30, 2010

The Troubled Asset Relief Program -- aka "the bank bailout program" -- is scheduled to expire Sunday.

This was, you will recall, the $700 billion "bazooka" President George W. Bush's Secretary of Treasury Henry Paulson requested in 2008 to stop the financial panic once and for all.

With the program now expiring, you can expect to hear pundits and politicians rushing to pass judgment. To save everyone some time: Yes, it was necessary; yes, it should have been more transparent and less generous to Wall Street; and yes, it should have been tied to tougher financial reforms like the Volcker Rule and breaking up "too big to fail" banks so that this never happens again.

While the "mother of all mother of all bailouts" probably saved us all from total economic ruin, critics of the program include ... well, just about everyone.

But our national fixation on TARP misses the bigger picture.

The bigger picture
The Center for Media and Democracy, a nonpartisan media and consumer watchdog that publishes and provides a monthly updated bailout tracker, gave me an exclusive sneak peek at its new report.

These folks have done some of the best work out there digging through all the data to tabulate a complete picture of bailout costs. Here's the upshot from their new study:

This graph represents all the money that has gone out the door or was created on the Federal Reserve's balance sheet.

TARP, which invested hundreds of billions of dollars in everyone from community banks, to Goldman Sachs (NYSE: GS  ) , to traditional banks like US Bancorp (NYSE: USB  ) , to GMAC and American Express, was just a drop in the bucket. The bulk of bailout funds took the form of lending to banks and buying up bank assets:

Bailout Program

Disbursed Funds (in billions)

Things It Did

Bank liquidity loans


Loaned emergency funds to banks in exchange for collateral

Fed mortgage-backed securities


Bought mortgage-backed securities

Foreign central bank


Lent dollars to foreign central banks in exchange for collateral

Fannie & Freddie


Lent money, bought assets



Invested capital in hundreds of financials and provided additional capital for AIG (NYSE: AIG  ) , Citigroup (NYSE: C  ) , and Bank of America (NYSE: BAC  )

Toxic assets


Bought toxic assets from AIG and from Bear Stearns to facilitate JPMorgan Chase's (NYSE: JPM  ) acquisition

Now, before your head explodes, realize that most of this money has already been returned. Here's what's ongoing: