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Was TARP a Success ... or a Failure?

The government wants Main Street to believe that far from a toxic word, TARP will go down in history as a break-even, and maybe even profitable, investment. What do you think? Take our poll and see what the readers of 'TheStreet' think about TARP.

(TARP poll story updated for Treasury release of official TARP cost estimates, AIG internal memo)



) -- It's too soon to know how history will judge TARP, but the government isn't waiting for that history to be written. The Troubled Asset Relief Program -- which on Main Street is about as toxic as the toxic lending practices that ushered it into existence -- was consigned to history over the weekend. Not coincidentally, the debate has heightened about whether TARP may have actually been a fairly good, or at least benign, investment.

No one is saying that the TARP investment was like getting into


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when its shares fell to $262, or


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after its shares fell to $82 back in November 2008. Both those tech plays would have been better investments for $700 billion of U.S. government money from a pure portfolio perspective. Apple shares have near-quadrupled since then, and Google shares have doubled.

So no one can say that former Treasury Secretary Hank Paulson should be appearing on

Fast Money


The government isn't in the business of buying and selling stocks, but it would like Main Street to believe, in the least, that TARP might turn a profit -- and with that result, the toxic baggage that TARP has carried should be erased from the roll of low points in economic history. The problem, of course, is that while the government isn't in the business of buying and selling stocks, much of the criticism of TARP stems from outrage that the government put itself in the business of bailing out the banks, automakers, and TARP poster child

American International Group

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It doesn't matter if TARP isn't a massive a loss for the U.S. tax payer as it once was predicted to become. It still should have never been created. Or should it have been?

>>Doubts Over Treasuries Rosy TARP Payback Scenario

Last Thursday, the government announced that it had worked out a deal with AIG to begin repaying its massive $70 billion bailout. At a larger level, the White House said last Thursday that projected losses from TARP may be $50 billion at most. That's a loss not worth trumpeting, as a loss is a loss when it's at the expense of the taxpayer -- but it's far less than the initial predictions for the TARP price tag. In the middle of last year, the government was predicting that TARP might cost $341 billion.

On Tuesday, the Treasury made the final TARP accounting estimate a matter of official government record, releasing its two-year retrospective report on the Troubled Asset Relief Program. The Treasury report states that the total cost of TARP will be roughly $50 billion. In addition, using the same assumptions, Treasury estimates that the combined cost of TARP programs and other Treasury interests in AIG will be about $30 billion.

Cast Your Vote on TARP's Legacy

Was TARP a Success or Failure?


quoted from an AIG memo written by AIG CEO Robert Benmosche on Tuesday and sent to employees that said, "We have commenced discussions with the U.S. government on the process and terms of a complete government exit.... Depending of course on market conditions, which could remain volatile, we expect to make meaningful progress in 2010 on repaying the Federal Reserve Bank of New York, and over time fully repaying all of our obligations to taxpayers."

Was Main Street too hard on TARP? For one, TARP never even came close to tapping the $700 billion earmarked for bailouts. The Treasury doled out about $387 billion in the end, and a TARP 2.0., which was proposed to the tune of another $750 billion, was never needed.

In fact, the government view of TARP has been getting better since May.

In August, the Congressional Budget Office reduced its TARP loss projection to $66 billion. It had once been higher than the administration's $341 billion estimate.

By May, when the government began planning the sale of its


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stake, the estimate for the ultimate TARP price tag was reduced to $105.4 billion by Obama's bean counters.

Also in May, the Treasury was predicting that TARP losses related to the AIG bailout would be $3 billion less than anticipated.

The government's investment in the big banks has already paid off, and not just the Citi stake. Treasury has pocketed roughly $25 billion from dividends and stock warrant sales.

All of the TARP rosy scenarios are based on the government being able to continue to get good prices for its stake in bailed out companies, like Citigroup and AIG, and the automakers. That's a process that will play out over some time. AIG is currently shopping an IPO of its Asian-based operations in Hong Kong and reports on Monday were that it would have to settle for a lower deal value than it originally wanted.

>>Opinions Differ on TARP's Real Costs

For the sake of investment comparison, it would have been for easier to invest $400 billion in Apple and Google shares in November 2008 and cash those gains in now to the tune of $700 billion or so. That might not have saved the economy, if that's what TARP did.

Cast Your Vote on TARP's Legacy

Was TARP a Success or Failure?

Not every aspect of TARP has been an unrivaled, or even minor success, or less than worst-case scenario in actuality. The TARP mortgage modification program, HAMP, has turned out to be a loser of an idea. Some politicians have been given the heave-ho by voters as a result of TARP support, too.

>>10 Banks That Still Owe TARP

Yet with the Treasury now estimating that TARP could break even, or turn a profit -- or at most lost reckons that taxpayers will lose less than $50 billion -- TARP haters do need to take a step back and consider whether their TARP hatred was on principle or based on doing the math.

For those standing on anti-TARP principle, the ground is still firm. Too much government intervention isn't an argument based on a final bill being revised lower for the taxpayer.

For those who joined the "I hate TARP" party based on the numbers, though, a final price tag from TARP that is actually, and suddenly, a tidy profit for the federal coffers, begs TARP haters to take another look at the toxic government bailout program.

Indeed, the all the recent harping on TARP raises the question,

Was TARP really such a bad idea?

Take our poll below to see the consensus of



--Written by Eric Rosenbaum in New York.

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>>Opinions Differ on TARP's Real Costs

>>10 Banks That Still Owe TARP

>>Doubts Over Treasuries Rosy TARP Payback Scenario

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