TARP watchdog (not to be confused with TARPdog, handed out by Citi to prospective customers) Neal Barofsky gave us some extremely ugly numbers today as to our total potential liability if bailed-out banks go sour and their investments fall off a cliff:
“Although large in its own right, TARP is only a part of the combined efforts of the federal government to address the financial crisis,” Barofsky writes in his latest quarterly report to Congress. “Approximately 50 initiatives or programs have been created by various federal agencies since 2007 to provide potential support totaling more than $23.7 trillion.”
The current balance of support provided is about $3 trillion, Barofsky says. About half of that is Federal Reserve lending; the rest includes TARP, Federal Deposit Insurance Corp. assistance and other programs.
To get to the $23.7 trillion of “total potential support,” Barofsky calculates that the government’s programs would have to balloon to these amounts: Fed lending, $6.8 trillion; TARP, $3 trillion; FDIC, $2.3 trillion; non-TARP Treasury aid, $4.4 trillion; and various mortgage-aid programs, $7.2 trillion.
His worst-case is, honestly, worst-case. It’s complete bankfail, every Fannie/Freddie mortgage going bad, it’s Treasury itself defaulting. But, that’s what the definition of worst-case is.
Squawk Box, however, seemed pretty unamused by the idea. Barofsky – how dare you give Congress this kind of fodder? Don’t you know they’ll start thinking this bailout might have been bad, and that maybe the people will get a whiff of that, and this rally will evaporate? I mean – the Congresscritters might start saying stuff like this:
“If the banks can’t tell us how they’re spending TARP money, then maybe they shouldn’t have it,” said Brooklyn Rep. Ed Towns, chairman of the House Oversight Committee.
Here’s the Squawk video. Enjoy: