SIGTARP Report Tomorrow

Neil Barofsky is the Special Inspector General for the Troubled Assets Relief Program (SIGTARP). That may be difficult to fit on a business card.

Barofsky is making headlines today on two fronts. First, he has released his latest report from the office of SIGTARP entitled "Survey Demonstrates that Banks Can Provide Meaningful Information on Their Use of TARP Funds" - dang, that's another mouthful. The report is forty-four pages long and can be read here. It is difficult to say exactly how TARP funds are used since money is fungible. If I give you twenty dollars and you go to the grocery store and spend ninety dollars, you probably won't be able to tell me precisely how you spent the twenty dollars.

However, Barofsky's report comes with the following summary:

Although most banks reported that they did not segregate or track TARP fund usage on a dollar-for-dollar basis, most banks were able to provide insights into their actual or planned use of TARP funds. Over 98% of survey recipients reported their actual uses of TARP funds.

Barofsky is set to testify before the House Committee on Oversight and Government Reform tomorrow morning. This report, however, is not the bombshell. The news media apparently has an advance copy of his prepared testimony where he states the the total cost of our government bailouts could reach... wait for it...

$23,700,000,000,000.00 - that's $23.7 trillion, almost double the U.S. GDP.

The story can be read here. I'm looking forward to his testimony which I'm sure will be covered on CSPAN.

Now, in the spirit of full disclosure, which we feel is important, it should be noted that this will likely not be the cost of the bailouts. Without seeing the details, I'm sure this covers loan guarantees which will not likely lose 100%. For example, in many cases the Treasury, FDIC, or Fed has provided a loan guarantee for a bank (such as Bank of America or Citigroup). In these circumstances, the government has promised to pay back loans to creditors if the bank is unable to do so. A complete loss on the guarantee would only be recognized if the bank went bankrupt without repaying any of their guaranteed debt. The Treasury Department has been quick to point this out and paint Barofsky's report as hyperbole.

Nonetheless, $24T is outrageous.