Crisis may cost US taxpayers $36 trillion

United States taxpayers may be on the hook for as much as US$23.7 trillion ($36.3 trillion) to bolster the economy and bail out financial companies, says Neil Barofsky, special inspector general for the Treasury's Troubled Asset Relief Programme.

The US$700 billion bank-investment programme represents a fraction of all federal support to resuscitate the US financial system, including US$6.8 trillion in aid offered by the Federal Reserve, Barofsky said in a report yesterday.

"Tarp has evolved into a programme of unprecedented scope, scale and complexity," Barofsky said in testimony prepared for a hearing today before the House Committee on Oversight and Government Reform.

Treasury spokesman Andrew Williams said the US had spent less than US$2 trillion so far and Barofsky's estimates were flawed because they didn't take into account assets that backed those programmes or fees charged to recoup some costs shouldered by taxpayers.

"This estimate includes programmes at their hypothetical maximum size, and it was never likely that the programmes would be maxed out at the same time."

Barofsky's estimates include US$2.3 trillion in programmes offered by the Federal Deposit Insurance, US$7.4 trillion in Tarp and other aid from the Treasury and US$7.2 trillion in federal money for Fannie Mae, Freddie Mac, credit unions, Veterans Affairs and other federal programmes.

Williams said the programmes included escalating fee structures designed to make them "increasingly unattractive as financial markets normalise". Dependence on these federal programmes had begun to decline, as shown by US$70 billion in Tarp capital investments already repaid, he said.

The Treasury has spent US$441 billion of Tarp funds so far and has allocated US$202.1 billion more for other spending, according to Barofsky.

He said in the nine months since Congress authorised Tarp, Treasury had created 12 schemes involving funds that might reach almost US$3 trillion.

He said Treasury Secretary Timothy Geithner should press banks for more information on how they use the more than US$200 billion the Government had pumped into US financial institutions.

- BLOOMBERG