The Obama administration recently posted the press release below on its TARP website, www.financialstability.gov. While the White House typically gives news releases a positive spin to justify and promote its policies, this particular release - originally sent to reporters as a series of talking points before being posted online - has several half-truths and fails to tell the full story behind some issues surrounding the Troubled Asset Relief Program.

We reprinted the release, with BailoutSleuth's notes it italics. You can read the original release, without BailoutSleuth's analysis, at http://financialstability.gov/impact/

What You Haven't Heard About TARP
Updated: October 1, 2010

The Troubled Asset Relief Program (TARP) is winding down. As of October 3, 2010, no new investments can be made through that program.

Looking back, it's clear that TARP has played a critical role in stabilizing the financial system during a period of historic crisis and has helped put our country on the path to economic recovery - at a fraction of that initiative's original projected cost. With all the myths you've likely heard about TARP, though, sometimes the truth gets lost in the shuffle. But here are the facts:

TARP broke the back of a growing panic, recapitalized the financial system, restarted the credit markets, and lowered borrowing costs for businesses and families. That made the recovery possible. Independent experts agree that TARP, along with the government's other responses to the financial crisis, saved nearly 8.5 million American jobs, helping to prevent the recession from turning into another Great Depression.

As is the case with most political issues, there is actually some disagreement among independent experts about TARP's effectiveness. For example, William Isaac, a former Federal Deposit Insurance Corp. chairman during the Reagan administration, wrote last week that, in 2008, TARP supporters warned that failure to pass the measure would cause the Dow to fall 1,000 points. Once the bill passed, the Dow fell more than 2,600 in less than a month. "It is difficult to imagine how rejection of the bill could have produced worse results," Isaac wrote. "Objectively, the TARP did nothing to stabilize the financial system that could not have been done without it. The negative aspects of the TARP far outweigh any possible benefit."

The stock market plunged even more sharply in February and March of 2009. Since then, however, the market has climbed more than 50 percent, and the Dow Jones Industrial Average now is about 10 percent above its pre-TARP level.

The government's retrospective of the TARP program makes no mention of its originally stated purpose -- to help banks and other financial services companies by using taxpayer money to take so-called "toxic assets'' off of their books. Instead, then-Treasury Secretary Henry Paulson decided the best course of action would be to inject capital directly into the banks, to keep them solvent and spare them from immediately having to write down their bad assets.

Although some mortgage-backed securities and other distressed assets have been absorbed through the Federal Reserve's TALF program and other channels, it appears that much of the rest remains on the books of the bailed-out banks. And many analysts are predicting a coming commercial real-estate slump that could rival the residential real-estate collapse.

TARP provided crucial assistance to small businesses, community banks, American automakers, and struggling homeowners. The Congressional Oversight Panel -- TARP's official government watchdog -- says that "although the Troubled Asset Relief Program has launched several initiatives aimed at restoring credit availability, it is not clear that they have had any significant impact on small business lending." The panel also notes that community banks are struggling to pay back their TARP aid. The program's mortgage modification program has been almost universally panned and has given permanent aid to fewer than half a million people.

TARP did all this at a cost dramatically lower than first expected. Estimates of that program's costs continue to fall, and we continue to withdraw our support for the private sector more quickly than anticipated. Treasury is now confident that TARP will cost less than $50 billion - a fraction of the $700 billion originally authorized. The non-partisan Congressional Budget Office actually puts the cost higher, around $66 billion, though that's still an improvement from its estimate earlier this year of $109 billion (and vastly better than the $700 billion that some people think the program costs).

American taxpayers have already been repaid nearly $234 billion in TARP funds, and we have proposed to ensure they are repaid in full by enacting a Financial Crisis Responsibility Fee.

No More TARPs. The Obama Administration worked tirelessly with Congress to enact the Dodd-Frank Act Wall Street Reform and Consumer Protection Act, which ends taxpayer-funded bailouts.

So here are some important details about TARP that you probably won't hear people talking about when discussing that program.

TARP, ARRA, and Other Targeted, Temporary Government Support for the Private Sector Helped Prevent a Second Great Depression. In a July 2010 paper, Mark Zandi (a former economic adviser for Senator John McCain's presidential campaign) and Alan S. Blinder (a former economic adviser for President Clinton) estimate that in 2010, without the federal government's response to the financial crisis, including TARP and the American Reinvestment and Recovery Act, GDP would be 11.5 percent lower, there would be nearly 8.5 million fewer jobs, the unemployment rate would exceed 15 percent, and the nation would now be experiencing deflation. They write that the federal government's policies "probably averted what could have been called Great Depression 2.0."

Perhaps a minor quibble, but the Zandi reference has frequently been made by the administration and other supporters of TARP. The logic is that if someone who worked for President Obama's opponent recognizes the merits of TARP, it must be a good thing. The problem, of course, is that Zandi has also served as an adviser to the Obama White House, as CBS reported earlier this summer. Zandi, the chief economist at Moody's, is a respected economist who has advised both parties.

TARP Helped Main Street Banks and Small Businesses. Through TARP, the Treasury invested taxpayer money in more than  450 small and community banks. These are the types of banks that are the having the most trouble paying back their aid. They also have frequently failed to pay taxpayers the quarterly dividends they are owed as a condition of providing assistance to banks, as BailoutSleuth has previously reported.

In July, the Congressional Oversight Panel reported that many of the 690 small- and medium-sized banks receiving TARP aid are struggling to pay it back. Just 10 percent of them had done so when the report was released. When the looming commercial real estate crisis hits, those banks will likely suffer even more. Taxpayers have already started taking sizable losses on TARP loans to smaller banks, since Treasury has had to restructure several deals -- at a cost of billions to taxpayers -- to help them avert failure.

Moreover, lending at banks with less than $1 billion in assets that received TARP funds has grown more than at those that did not. And because small banks are a crucial source of credit for small businesses, TARP assistance for main street banks is helping provide the financing that small businesses need to expand and create jobs.

Earlier this year, BailoutSleuth reported on a study from the Congressional Oversight Panel, that said TARP has done little to increase small business lending.The panel criticized the Treasury Department for not requiring that banks receiving billions in public aid use that money to extend more credit.

"As the banks got healthier, in theory, they'd resume normal lending so people could continue to buy cars, homes, and all the other things that make them feel good," wrote U.S. News & World Report's head business correspondent Rick Newman. "At the same time, however, regulators clamped down on the banks so they'd stop making the kinds of irresponsible loans that got them into trouble in the first place."

TARP Protected US Manufacturing and Jobs by Helping to Save the American Auto Industry. In the twelve months before President Obama took office, American auto companies lost hundreds of thousands of jobs, sales plunged 40 percent, and liquidation was a very real possibility. TARP investments in GM and Chrysler, as well as the hard decisions made by those companies in order to adapt and compete in 21st century, have helped turn the industry around and save one million jobs. Since GM and Chrysler have emerged from bankruptcy, the auto industry has added 76,300 jobs - the strongest growth in 10 years - and for the first time since 2004, all of the big three auto companies are operating at a profit.

TARP Provided Immediate Relief to Struggling Homeowners. Over 1.3 million homeowners had their monthly payments reduced to affordable levels through the Home Affordable Modification Program (HAMP), including more than 400,000 homeowners whose mortgage terms have been modified permanently. At the same time, HAMP wasn't designed to prevent every foreclosure, and it wasn't a bailout for irresponsible homeowners. The program protected taxpayers by targeting homeowners with real hardship who were committed to staying in their homes and who kept up with their payments.

The HAMP program has been viewed as a disaster by just about everyone outside of the Treasury Department. Every TARP watchdog -- from the Government Accountability Office to the TARP Special Inspector General to the Congressional Oversight Panel to various congressional committees -- has criticized this effort. The program has been marred by mistakes from servicers, such as losing homeowners' paperwork and miscommunicating information to applicants. Additionally, Treasury officials are frequently criticized for using misleading figures about the program.

For example, Treasury boasts that "over 1.3 million homeowners had their monthly payments reduced" through HAMP. But most of those people only had the payments reduced through HAMP for a few months. Despite the billions of dollars made available for HAMP, fewer than half a million people received permanent mortgage modifications through the program. The month of August had the fewest number of permanent modifications to date. Meanwhile, more than 680,000 people have been removed from the program and failed to get permanent HAMP mods.

TARP is Now Expected to Cost Less than $50 Billion - A Fraction of the $700 Billion Originally Authorized. Substantial increases in TARP repayments and declines in expected TARP expenditures have dramatically reduced the expected cost of the program. Treasury is now confident that the lifetime cost of TARP will be less than $50 billion - a fraction of the $700 billion originally authorized. As a share of GDP, the government's financial interventions to address the financial crisis are now expected to cost less than the GAO's estimate of what it took to clean up the Savings and Loan Crisis in the 1980s. See above note on CBO price estimate.

Taxpayer Returns Already Total $234 Billion, and We Want to Make Sure Taxpayers Are Repaid in Full. Taxpayers have already received a combined $234 billion in revenue from TARP investments. Three-fourths of the TARP funds provided to banks have already been returned, and taxpayers will ultimately receive a substantial profit from those investments. And the Administration remains committed to passing a Financial Crisis Responsibility Fee to make sure taxpayers are fully repaid for any remaining costs of TARP.

TARP is Ending. After October 3, 2010, no new TARP investments can be made. Additionally, the Dodd‐Frank Wall Street Reform and Consumer Protection Act capped TARP purchase authority at $475 billion, down from the $700 billion originally allocated. But even before Wall Street Reform, Treasury was already well on its way to winding down many TARP programs, and planned to invest significantly less than $700 billion.

No More TARPs. A program like TARP will never be necessary again. President Obama and Treasury Secretary Geithner worked tirelessly with Congress to enact the Dodd-Frank Act, which will ensure that the American people are never again put on the hook for the reckless acts of a few financial firms. That law gives the government new tools to shut down and dismember failing institutions, rather than bail them out with taxpayer dollars.

Proclaiming that TARP will "never be necessary again" is a bold statement, considering the lack of certified soothsayers on the White House payroll. And some don't think it's far-fetched to assume there will be more bailouts to come. As The Atlantic's David Indiviglio wrote , "TARP worked so incredibly well that we probably haven't seen the last of it." If several of the major banks found themselves on the verge of collapse, Dodd-Frank's resolution authority couldn't wind them down simultaneously. In that case "the government will figure out some new bailout plan."

Former International Monetary Fund chief economist Simon Johnson agrees. He wrote last week, "The bailout potential exists as long as the government reasonably fears global financial panic if such banks are allowed to default on their debts."

Unprecedented Transparency. Treasury has published hundreds of reports on TARP investments, including TARP Transaction Reports; monthly congressional reports; dividend and interest reports; Making Home Affordable Program reports, and numerous of other disclosure documents, all of which are public and posted on our website, www.financialstability.gov.

The Treasury Department has frequently been criticized for a lack of transparency surrounding some TARP issues. Last month, Treasury declined to allow a contractor to testify at a hearing about the outsourcing of TARP management, BailoutSleuth reported. At that same hearing, Damon Silvers, a member of the Congressional Oversight Panel, noted that "the vast majority of people working on the TARP today receive their paychecks from companies and not the federal government." Many TARP contracts were secured without full, open competition. And contracts posted on the department's website reveal little about how a company was selected, how an agreement was negotiated, or how the parties will resolve performance issues, testified George Washington University law professor Steven Schooner.

See the price? Neither did we. It was entirely redacted. Turns out it's worth an estimated $20 million.