Colin Barr

Following the money in banking, economics, and Washington

TARP ends thrifty but unloved

October 1, 2010: 1:09 PM ET

Saving money can't buy TARP love.

The Troubled Asset Relief Program winds down Sunday. TARP will continue to collect dividends and repayments but won't extend any new loans.

TARP costs: Free falling

The end comes two years after Congress gave Treasury $700 billion to spend at its discretion to prop up troubled financial giants like Citigroup (C) and Bank of America (BAC), and prevent an economic collapse.

By all accounts the collapse was forestalled, and the big banks lumber on. TARP didn't even end up being that expensive.

Loans have been getting repaid at a steady clip, and Treasury said this week it expects the total cost of the program to end up below $50 billion. You could have gotten pretty good odds two years ago against the number being that low.

Yet TARP's thrift counts for little at a time when the economy is a mess and politics are getting ever angrier. Good riddance, many people are saying, to a necessary evil.

"No one doubts the good intentions that accompanied that plan," said Dick Evans, CEO of Cullen/Frost Bankers (CFR), a San Antonio-based bank that turned down TARP funds and hasn't found itself regretting the decision. "But there has been so much uncertainty created from a policy standpoint, and we have to change that before we're going to be able to move forward."

The government never actually approached the TARP spending ceiling. It lent out just $386 billion, according to Treasury's latest count. That compares with the $475 billion authorized in TARP's final budget, which was slimmed down after the Dodd Frank Act obliged the government to shut the program down sooner rather than later.

What's more, the money Treasury secretaries Henry Paulson and Tim Geithner spent is coming back into the government's coffers at a much higher rate than expected, as the chart to the right shows.

Geithner said this week he expects the total cost of the program to be less than $50 billion – just a fraction of the $341 billion tab the administration was considering in August of 2009 as it considered its budget plans.

Yet if TARP and other government programs helped avert an economic collapse, they also didn't give way to a robust recovery.

It's likely that nothing the government could have done by the fall of 2008 would have set up a strong bounceback, given the scope of the misspending that took place in the decade before the meltdown.

But money spent to bail out bank investors and well paid executives chafed then and does more so now. Two years on, it's  apparent that more or less everyone who wasn't bailed out faces reduced living standards in coming years.

Meanwhile, despite the regulatory reform efforts to end bailouts, there is a sense that the government may well make the same mistakes in the next crisis, and is unwilling to confront many of the errors that led to the 2008 collapse.

None of this, needless to say, confers confidence – which is what Evans and others say is the lacking ingredient, TARP or no TARP.

"I have faith in the American people to go forward, but we need clarity," he said. "Sometimes you have to slow down before you speed up, and I think we could use some of that mindset in Washington right now."

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About This Author
Colin Barr
Colin Barr
Senior Writer, Fortune

Colin Barr has covered finance for Fortune.com since November 2007. Previously he was a writer and editor for TheStreet.com, winning a 2006 Society of American Business Editors and Writers award for "The Five Dumbest Things on Wall Street," and for Dow Jones Newswires. He is a 1991 graduate of Penn State and lives in Port Washington, N.Y., with his wife Meena Bose and their two kids.

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