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A Peek Under the TARP

Russ Krull
March 28, 2012

The Department of Treasury's recent sale of a slice of its AIG (NYSE: AIG  ) stock seemed like a good reason to see how that old TARP -- the Troubled Asset Relief Program -- is holding up.

TARP consists of a number of subprograms, including bank support, credit markets, auto-industry support, AIG support, and housing programs. I'll run down how taxpayers are making out in each program group.

Bank support
The bank-support programs were the first investments made under TARP. Back in October 2008, leaders from eight of the nation's largest banks were offered the opportunity to sell preferred stock to the Treasury, and some reports said it was an offer that couldn't be refused. More than 700 banks took shelter under TARP, and more than half of those are still in the program. The good news for taxpayers is that most of the remaining banks are small and the programs have actually turned a profit: $245 billion was invested, and $259 billion has been returned in repayments, dividends, and warrant sales. There's still about $17 billion invested in the remaining banks, and Treasury plans to start auctioning some of that paper off.

Credit markets
Most of the money here is in the Public-Private Investment Partnership. The plan for all those P's was to set up partnerships to buy problem loan assets, with Treasury and private investors sharing the risks and proceeds. Up to $100 billion of TARP money was planned for the program, but only about $18 billion was spent. About $4 billion has been returned, and the remainder is still invested in the partnerships. No losses have been reported on PPIP.

Auto-industry support
There are a lot of potential losses here. Treasury put more than $81 billion into General Motors (NYSE: GM  ) , Ally/GMAC, and Chrysler. The Chrysler investment has been closed out with a net loss of about a billion dollars. The old GMAC, now Ally, still has almost $14 billion of taxpayers' money, and Ally holds the distinction of being the only financial firm to make three separate trips to TARP. General Motors' trip down bankruptcy lane, meanwhile, included more than $50 billion of TARP investments, with repayments, a stock sale, and interest having returned about $24 billion. That leaves a 500 million-share stock holding worth about $12.5 billion held by Treasury, meaning taxpayers are staring at a multibillion-dollar loss unless GM stock gets somewhere north of double its current price.

AIG support
AIG has the dubious honor of being the only company with its very own TARP subprogram. At nearly $70 billion, AIG was also the biggest TARP investment. Treasury recently sold $6 billion of its AIG stake for $29 per share, and combined with other repayments, that leaves about $39 billion before taxpayers break even. Treasury still holds 1.25 billion shares of AIG worth more than $35 billion at recent share prices. The math says AIG is within reasonable striking range of breaking even.

Housing programs
The total spent on the various housing-support programs is relatively small -- about $3.5 billion to date. The programs have about $45 billion that could be spent.