Yesterday, TARP Inspector General Neil Barosky released a report which crudely tallied up the cost of every economic rescue program proposed during the current crisis — including those that have been discontinued or never even began — to state that the total scope of all financial rescue programs comes to about $23.7 trillion. Cable news hosts ran wild with the report, using it to claim that taxpayers will “ultimately” wind up paying $23 trillion in “bailouts.”
The number continued to be cited on cable last night and this morning, with Fox News even claiming that $23 trillion will be the final cost of TARP alone. But Barofsky himself appeared on CNN to explain that the actual outstanding amount for the financial rescues is closer to $3 trillion, including loans that have yet to be repaid. Watch a compilation:
Barofsky’s report clearly states that “these numbers may have some overlap, and have not been evaluated to provide an estimate of likely net costs to the taxpayer”:
[S]ome of the programs have been discontinued or even, in some cases, not utilized. As such, these total potential support figures do not represent a current total, but the sum total of all support programs announced since the onset of the financial crisis in 2007.
But this doesn’t go far enough in explaining how unlikely we are to ever come close to spending so much money. As Floyd Norris explained in the New York Times, Barofsky’s estimate “assumes that every home mortgage backed by Fannie Mae or Freddie Mac goes into default, and all the homes turn out to be worthless. It assumes that every bank in America fails, with not a single asset worth even a penny. And it assumes that all of the assets held by money market mutual funds, including Treasury bills, turn out to be worthless.” If this doomsday economic scenario were ever to occur, the American currency would be rendered worthless.
Media Matters pointed out that both USA Today and the CBS Evening News used the same misleading number. And as Norris put it, publishing such a meaningless number makes Barofsky seem like nothing more than “an irresponsible headline hunter.”
Cross-posted on The Wonk Room.