TARP Won't Lose as Much as Originally Thought

The New York Times reports today that the government will lose less than it expected from the Tarp program:

The Treasury Department expects to recover all but $42 billion of the $370 billion it has lent to ailing companies since the financial crisis began last year, with the portion lent to banks actually showing a slight profit, according to a new Treasury report.

The new assessment of the $700 billion bailout program, provided by two Treasury officials on Sunday ahead of a report to Congress on Monday, is vastly improved from the Obama administration’s estimates last summer of $341 billion in potential losses from the Troubled Asset Relief Program. That figure anticipated more financial troubles requiring intervention.

The officials said the government could ultimately lose $100 billion more from the bailout program in new loans to banks, aid to troubled homeowners and credit to small businesses.

This is good news, but GMAC will bite TARP next year and may have to be nationalized. The fact that you can lease a Mercedes for almost the same price as a Chevy due to poor residual values, might force GMAC to make bad loans for Chrysler and GM. As GMAC tries to tighten up its leading standards, then it will kills Chevy and GM. GMAC cannot win either way.

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