Inspector: Bank bailout could cost $23T

WASHINGTON – American taxpayers could wind up paying as much as $23.7 trillion, or nearly double last year’s national gross domestic product, when the final cost of rescuing financial institutions and shoring up the credit markets is calculated, according to the special inspector general for the U.S. Treasury Department’s Troubled Asset Relief Program (TARP).

“TARP has evolved into a program of unprecedented scope, scale and complexity,” the inspector, Neil Barofsky, said in testimony prepared for a hearing tomorrow before the House Committee on Oversight and Government Reform, Bloomberg News reported.

Barofsky’s estimate of the rescue program’s maximum cost would amount to an eye-popping $79,000 each for every man, woman and child in the U.S. today.

Barofsky said the $700 billion bailout package passed by Congress after the collapse of Lehman Bros. last September is just the start. The array of related programs includes $6.8 trillion in Federal Reserve assistance; $2.3 trillion in programs offered by the Federal Deposit Insurance Corp.; and $7.2 trillion in federal money for Fannie Mae, Freddie Mac, credit unions, Veterans Affairs and other federal programs.

A spokesman for the Treasury, Andrew Williams, quickly criticized Barofsky’s findings as flawed, saying the federal government’s expenditures have totaled less than $2 trillion thus far and that the inspector general failed to account for fees and assets that could offset some of the program’s cost.

“These estimates of potential exposures do not provide a useful framework for evaluating the potential cost of these programs,” Williams told Bloomberg. “This estimate includes programs at their hypothetical maximum size, and it was never likely that the programs would be maxed out at the same time.”

In a separate report, Barofsky criticized the Treasury Department, saying it had “repeatedly failed to adopt recommendations” on increasing the transparency of TARP to implement it “with the highest degree of accountability.”

The Treasury has spent $441 billion of TARP funds so far and allocated $202.1 billion more for other spending, according to Bloomberg.

U.S. Rep. Darrell Issa, R-Calif., the ranking Republican on the oversight committee, said the Obama administration needed to increase accountability and oversight of TARP. “The American people deserve to know how their tax dollars are being spent,” he said in a statement.

Barofsky also released findings from a survey he conducted of 360 banks that received money from TARP. Among those banks polled, 83 percent said they had used TARP money for lending; 43 percent said they used funds to increase their reserves; and 31 percent said they made new investments.

Barofsky also said his office is in the midst of conducting 35 ongoing criminal investigations into alleged abuse of the TARP programs.