As TARP Turns 10, Looking Back at the U.S. Government’s Assistance to the Banking Sector

Photo of a Department of the Treasury entranceTen years ago this week, Congress responded to turmoil in the financial markets by creating the Troubled Asset Relief Program (TARP). Through TARP, the Treasury Department disbursed a total of $440 billion to help stabilize the financial system, restore economic growth, and mitigate foreclosures. This included $245 billion in capital investments to banks.

In addition to TARP, there were other major sources of federal government assistance to the banking sector during the financial crisis. For example, the Federal Reserve and FDIC also used emergency authorities to create temporary crisis programs and assist individual firms.

We issued a number of reports on these government interventions. But we often get asked about the bottom line: how much government money actually went to the banks? Today’s WatchBlog explores.

Did the banks really receive $16 trillion in government aid?

The short answer: probably not; and adding it up is trickier than you might expect.

Many articles have pegged the total at $16 trillion or more, perhaps based on a number in a GAO report table. Table 8 in the linked report totaled up transaction amounts (i.e., the dollar amount of each loan) but did not adjust for the term the loan was outstanding (i.e., 1 day or 30 days). These figures are useful for determining how much each financial institution used the crisis programs, but they don’t actually lead you to the bottom line.

A closer look at the numbers shows that the $16 trillion figure—made up entirely of Federal Reserve loans—likely vastly overstates the total assistance provided. For perspective, $16 trillion is close to the United States’ annual GDP at the time.

A hypothetical example of the complexity

Consider this example:

A bank takes out a $100 million Federal Reserve loan for a term of 30 days. It then renews this 30-day loan 11 times (effectively “repaying” the loan with a new loan) before repaying in full after 360 days:

Total transaction amount = $100 million X 12 loan transactions (original loan + 11 renewals) = $1.2 billion

Peak loan amount outstanding = $100 million

While this bank borrowed only $100 million for about one year, the total transaction amount is $1.2 billion—more than 10 times that amount. That is how adding up the total transaction amounts irrespective of the borrowing period can lead to huge numbers, like $16 trillion.

So, how much was it really?

To avoid mixing apples and oranges, a reasonable approach to answering this question is to present a separate peak or total amount for each different type of government assistance:

  • TARP’s Capital Purchase Program (CPP) disbursed $205 billion in capital. TARP also disbursed a total of $40 billion in additional capital to Citigroup and Bank of America and $68 billion in capital to AIG.
  • The Federal Reserve’s emergency lending peaked at over $1 trillion outstanding.
  • FDIC’s emergency program guaranteed about $350 billion in debt at its peak and about $830 billion of uninsured deposits at the peak.

These examples capture only the largest programs that directly assisted banks but together give a picture of the magnitude of the assistance to the banking sector.  Roughly speaking these programs provided trillions of dollars of assistance but still a fraction of the $16 trillion figure. Calculating a precise total across different types of assistance is not easy, in part because the amounts above do not reflect how long it took institutions to repay the assistance. Looking specifically at the TARP program (excluding the Federal Reserve or FDIC programs), CBO estimates that the government’s total subsidy costs—including those already realized and those stemming from outstanding and anticipated transactions—total $32 billion.

To learn more, see our reports on:


  • Questions on the content of this post? Contact Lawrance L. Evans, Jr. at evansl@gao.gov.
  • Comments on GAO’s WatchBlog? Contact blog@gao.gov.
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