NU Online News Service, Oct. 5, 3:50 p.m. EDT
WASHINGTON–The Treasury Department said today that it expects the combined costs of the Troubled Asset Relief Program and other aid to American International Group will be "about $30 billion."
The estimates of losses on the government's total estimated $182 billion investment in AIG was released as part of an administration report indicating that the government's final cost of the TARP program overall will be a less-than-expected $50 billion.
The report said that Treasury invested $40 billion in AIG and that the additional funds were provided by the Federal Reserve, some of it through purchases of securities placed in Federal Reserve Bank of New York facilities that are now showing increases in value.
In the report, Treasury predicted that it will exit from investments in AIG and the automotive industry "much faster than anyone predicted."
The report said AIG has announced a restructuring plan that will "accelerate the timeline for repaying the government and put taxpayers in a considerably stronger position to recoup our investment in the company."
That, said the statement from Timothy Massad, acting assistant secretary for financial stability, makes clear that "TARP worked."
"Two years later, our financial system is stable, more than $204 billion of TARP funds have been repaid, only a quarter of the original $700 billion authorization remains outstanding, the total estimated cost of TARP has been cut by more than three-fourths, taxpayers have received $30 billion in income, and the TARP bank programs are on track to make solid returns for taxpayers," he said.
Mr. Massad said costs of the program are expected to come from losses related to TARP investments in auto companies and initiatives to help responsible homeowners avoid foreclosure.
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