The U.S. Treasury was quick to toot its own horn this week with news that the Troubled Asset Relief Program, or TARP, has turned a profit now that three financial institutions repaid a total of $7.4 billion in funds.
Treasury said the additional money puts TARP repayments at $251 billion in dividends, interest and incomes, while it spent $245 billion on the banks’ bailout. Treasury expects to earn nearly $20 billion in profit from the banking portion of the bailout.
But when it comes to Treasury's programs to offer relief to hard-hit homeowners, programs that have lost $45.6 billion, the Treasury hasn't been nearly as vocal. In fact, Republican efforts to kill President Obama's loan modification initiatives have put the Treasury on the defensive.
The Treasury sharply opposed a Republican bill to end the Home Affordable Modification Program, or HAMP, which was enacted two years ago with funds from TARP. HAMP offers incentives to loan servicers to modify loans for people having trouble making payments. But the Treasury Department has no authority to compel banks and loan servicers to participate, and so far the program has only modified about 600,000 loans, well below the 3 million to 4 million anticipated.
The Treasury has said terminating the program would keep it from helping tens of thousands of additional families each month and claimed the program is designed to protect taxpayer interest.
The GOP-led House voted to terminate HAMP on Wednesday. The House this month has also voted to kill three other programs aimed at reviving the struggling housing market, including one to aid homeowners who have lost their jobs or become sick and another helping state and local governments buy and revamp abandoned properties. All face veto threats in the unlikely event they clear the Senate, but they have given Republicans a platform to show their commitment to ending inefficient or expensive federal programs.
The Treasury Department said the lifetime cost of TARP is likely to be limited to funding for the department's housing programs, which the department said were not intended to be recovered.
But the Treasury has pat itself on the back for ensuring that TARP cost little or no money to taxpayers.
"While our overriding objective with TARP was to break the back of the financial crisis and save American jobs, the fact that our investment in banks has also delivered a significant profit for taxpayers is a welcome development," Treasury Secretary Tim Geithner said in a written statement.
"We still have more work to do repairing the damage caused by the crisis and strengthening the recovery, but today is an important milestone in our efforts to recover taxpayer dollars as we continue winding down TARP."
The Treasury Department also released a new estimate of the total cost of all the government's bailouts, including the massive assistance provided by the Federal Reserve to support the financial system. The new estimate projects an eventual profit of $24 billion, including a projected $110 billion in income Treasury estimates the Fed will make on its investments in mortgage-backed securities and other assets.
That gain will help offset losses of $45.6 billion in housing programs. But the outgoing overseer of TARP threw cold water on the good news.
"While the reduction in the anticipated direct financial costs of TARP from hundreds of billions of dollars to potentially $19 billion is certainly good news, the total cost of TARP necessarily involves far more than just dollars and cents," Neil Barofsky, the special inspector general for TARP, said in a legislative hearing Wednesday, his last day on the job.
"In other words, the good financial news should not distract from the careful and necessary assessment of TARP's considerable, non-financial costs that, while more difficult to measure, may be even more significant," he said.
The Associated Press contributed to this report.