Treasury puts cost of rescue effort at $29bn

Financial Times:

The US Treasury forecast that the core of the financial rescue would cost $29bn, a fraction of initial estimates, but acknowledged it would lose “substantial” money supporting the mortgage system.

With expiry of new payments from the $700bn troubled asset relief programme last Sunday, senior Obama administration officials have declared the rescue effort a success and the most cost-effective support to the banking system in several decades of crises.

Tim Geithner, US Treasury secretary, wrote to Congress on Tuesday to defend the programme. He noted it was launched as a bipartisan effort and that “many have lost sight of the pressing need for this initiative ... and criticised its successful implementation”.

Tarp alone should cost about $50bn, the Treasury said, down from initial estimates of more than $300bn and the last estimate by the non-partisan Congressional Budget Office of $66bn. Including returns generated from additional Treasury support to AIG, the insurer whose turnround has been quicker than expected, the cost was now pegged at $29bn.

The Treasury released the letter and cost estimate on Tuesday as part of a report on Tarp, which is marking its second anniversary.