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What ‘One-Time Charges’ from F2008-F2010
May Look Like on Net Basis Over Next 10 Years

One-Time Charges from the ‘Financial Crisis’ are Not Created Equal – While TARP Was the
Headliner, When All’s Said & Done, TARP may be Smallest Component, by a Long Shot

Current Cost
($B, as of 2/11)
Ultimate Cash Cost
($B, by F2020E)
Comments

TARP
$214B
– – -> <$51B1
May fall from net $214 billion to $51 billion or
less1 as banks continue to pay back their loans
and automakers / AIG seek IPOs / sales to
realize value of USA Inc.’s equity stake.

GSE
$152
– – -> ~$1602
May grow from net $152 billion to ~$160 billion
(or higher)2 as Fannie Mae and Freddie Mac
losses on loan guarantees stabilize and they
continue to pay dividends on USA Inc.’s shares.

ARRA
$177
– – -> $417
Should rise from $177 billion to $417 billion3
based on commitments…and a payback plan
was never factored into these payments.

Note: 1) Latest Treasury estimate as of 12/10, includes net profits from banks of $16B, net costs from AIG ($5B) / Automakers ($17B) / Consumers & Housing
programs ($-46B) and other. AIG net costs excludes potential gains from selling AIG’s common shares held by the Treasury, which could turn out to be a $22B profit
for the Treasury based on 10/1/10 closing price. Including this potential gain, TARP ultimate cost to the Treasury would be $29B. 2) White House OMB estimates
ultimate cash cost of Fannie Mae / Freddie Mac at $165B while the CBO estimates the ultimate cash costs at $160B. Both estimates imply an average default rate of
5-10% on Fannie Mae + Freddie Mac’s $5T loan guarantee portfolio and a loss severity of 50%. The Federal Housing Finance Agency (FHFA) estimates ultimate
costs to range from $142B to $259B. 3) Net cash costs are limited to discretionary spending items in ARRA. Source: CBO, U.S. Dept of Treasury, White House
OMB, FHFA.
KP
CB www.kpcb.com
USA Inc. | Income Statement Drilldown 205

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