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Financial bailout aid total: $23.7 trillion -- if all goes wrong

July 20, 2009 |  1:19 pm

In the annals of big bailout numbers, this is the biggest yet: U.S. government agencies could end up having to provide more than $23.7 trillion in assistance if all the programs involved in the financial-system rescue are maxed out, says the federal bailout watchdog.

But the figure, from the special inspector general of the Treasury’s Troubled Asset Relief Program, is an exercise in extrapolation -- and obviously designed to shock.

Neil Barofsky, the inspector general, gives that estimate in testimony he will deliver Tuesday to the House Committee on Oversight and Government Reform.

Barofsky "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.

"The estimates .. . are designed to suggest the scale and scope of those efforts and not to provide a firm financial statement," Barofsky writes. The numbers aren't meant to suggest what taxpayers could lose, because they don't take into account fees the government collects for the programs or the collateral that agencies take to back up their assistance.

Even so, the Obama administration isn’t amused. From Bloomberg News:

"These estimates of potential exposures do not provide a useful framework for evaluating the potential cost of these programs," Treasury spokesman Andrew Williams said. "This estimate includes programs at their hypothetical maximum size, and it was never likely that the programs would be maxed out at the same time."

Williams said the programs include escalating fee structures designed to make them "increasingly unattractive as financial markets normalize."

If that "normalizing" continues, Barofsky’s estimate will quickly be forgotten. But if the financial system begins to unravel again, his worst-case scenario will be there to haunt the administration, Congress and the rest of us.

-- Tom Petruno

Photo: Neil Barofsky. Credit: Matthew Cavanaugh / European Pressphoto Agency

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