The government's bailout of banks may cost U.S. taxpayers nearly two times more than originally estimated, according to the Congressional Budget Office.
The Troubled Asset Released Program, better known as TARP, will cost the federal government $34 billion, the CBO reported on its director's blog. That's $15 billion higher than the agency's previous estimate in March. The increase in the estimate is mostly due to a drop in the market value of the government's investments in American International Group and General Motors.
In addition to the TARP loan, the Federal Reserve provided financial institutions with loans totaling more than $1 trillion in December 2008, at the height of the credit crisis, according to Bloomberg.
Federal officials engineered TARP in October 2008, arguing that giving banks billions of dollars would help them withstand the credit crunch and stymie financial disaster. Critics allege that the money, which was supposed to spur lending to American businesses, never made it to Main Street. More recently, the contrast between the government bailouts bankers received and ordinary Americans' lingering jobs and housing woes has become a rallying cry for Occupy Wall Street.
In fact, many of the banks went back to making the same high-risk bets that got them into trouble in the first place, according to a September study from the University of Michigan. Banks treated the money and the limited guidelines that came with it as an implicit reassurance that the government would help the them in the event of future disaster.
Though Treasury Secretary Timothy Geithner told a watchdog panel in June 2010 that the banks had repaid 75 percent of the bailout money they received, there's still billions outstanding. Financial institutions owe the government $18 billion, while AIG still needs to repay $50 billion, according to a CBO infografic.
While the CBO boosted its estimate, it's guess is still lower than that of other agencies. The Office Of Management and Budget estimates that the bailout will cost the federal government $53 billion, according to the CBO blog.