	Introduction

In August 2007, asset-backed securities (ABS), particularly those backed by subprime mortgages, suddenly became illiquid and fell sharply in value as an unprecedented housing boom turned into a housing bust. Losses on the many ABS held by financial firms depleted their capital. Uncertainty about future losses on illiquid and complex assets led to firms having reduced access, sometimes catastrophically, to the private liquidity necessary to fund day-to-day activities. In September 2008, the crisis reached panic proportions. Fannie Mae and Freddie Mac, government-sponsored enterprises (GSEs) that supported a large proportion of the mortgage market, were taken into government conservatorship. Initially, the government approach was largely an ad hoc one, attempting to address the problems at individual institutions on a case-by-case basis. The panic in September 2008 convinced policymakers that a larger and more systemic approach was needed, and Congress passed the Emergency Economic Stabilization Act (EESA) to create the Troubled Asset Relief Program (TARP) in October 2008. In addition to TARP, the Federal Reserve and Federal Deposit Insurance Corporation (FDIC) implemented broad lending and guaranty programs. Because the crisis had so many causes and symptoms, the response tackled a number of disparate problems, and can be broadly categorized into programs that
increased institutions' liquidity (access to cash and easily tradable assets), such as direct lending facilities by the Federal Reserve or the FDIC's Temporary Liquidity Guarantee Program (TLGP); provided financial institutions with equity to rebuild their capital following asset write-downs, such as the Capital Purchase Program (CPP); purchased illiquid assets from financial institutions in order to restore confidence in their balance sheets in the eyes of investors, creditors, and counterparties, such as the Public-Private Partnership Investment Program (PPIP); intervened in specific financial markets that had ceased to function smoothly, such as the Commercial Paper Funding Facility (CPFF) and the Term Asset-Backed Securities Lending Facility (TALF); used public funds to prevent the failure of troubled institutions that were deemed by some "too big to fail" (TBTF) because of their systemic importance, such as AIG, Fannie Mae, and Freddie Mac. Estimating the Costs of Government Interventions

The primary goal of the various interventions was to end financial panic and restore normalcy to financial markets. Altogether, the financial crisis programs covered in this report brought back more in principal repayments and income than was paid out. Altogether to date, realized gains across the various programs exceed realized losses by tens of billions of dollars. Housing Assistance Programs . $0.1 billion is still outstanding. Over the life of the program, income exceeded losses. (This program is also often popularly referred to as TAG, however.) In this sense, the programs were arguably a success. Nevertheless, an important part of evaluating the government's performance is whether financial normalcy was restored at a minimum cost to the taxpayers. The true net cost to the government of these programs is the difference in present value between the initial outlay to acquire or guarantee the asset or make the loan, and the money recouped by the government from income payments and subsequent sale or repayment, taking into account the risks that the government was exposed to in the transaction. Altogether, these interventions have yielded tens of billions of dollars of net income for the taxpayers on a cash-flow basis, comp ared with initial estimates that they would cost taxpayers hundreds of billions of dollars.
In August 2007, asset-backed securities (ABS), particularly those backed by subprime mortgages, suddenly became illiquid and fell sharply in value as an unprecedented housing boom turned into a housing bust. Losses on the many ABS held by financial firms depleted their capital. Uncertainty about future losses on illiquid and complex assets led to firms having reduced access to private liquidity, sometimes catastrophically. In September 2008, the financial crisis reached panic proportions, with some large financial firms failing or needing government assistance to prevent their failure.
Initially, the government approach was largely ad hoc, addressing the problems at individual institutions on a case-by-case basis. The panic in September 2008 convinced policymakers that a system-wide approach was needed, and Congress created the Troubled Asset Relief Program (TARP) in October 2008. In addition to TARP, the Treasury, Federal Reserve (Fed), and Federal Deposit Insurance Corporation (FDIC) implemented broad lending and guarantee programs. Because the crisis had many causes and symptoms, the response tackled a number of disparate problems and can be broadly categorized into programs that (1) increased financial institutions' liquidity; (2) provided capital directly to financial institutions for them to recover from asset write-offs; (3) purchased illiquid assets from financial institutions to restore confidence in their balance sheets and thereby their continued solvency; (4) intervened in specific financial markets that had ceased to function smoothly; and (5) used public funds to prevent the failure of troubled institutions that were deemed systemically important, popularly referred to as "too big to fail."
The primary goal of the various interventions was to end the financial panic and restore normalcy to financial markets, rather than to make a profit for taxpayers. In this sense, the programs were arguably a success. Nevertheless, an important part of evaluating the government's performance is whether financial normalcy was restored at a minimum cost to taxpayers. By this measure, the financial performance of these interventions was far better than initial expectations that direct losses to taxpayers would run into the hundreds of billions of dollars.
Initial government outlays are a poor indicator of taxpayer exposure, because outlays were used to acquire or guarantee income-earning debt or equity instruments that could eventually be repaid or sold, potentially at a profit. For broadly available facilities accessed by financially sound institutions, the risk of default became relatively minor once financial markets resumed normal functioning. Of the 23 programs reviewed in this report, about $280 billion combined remains invested in preferred shares and bonds through two programs related to the housing government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac, and about $0.1 billion remains invested in two TARP programs. All other programs have been wound down entirely.
This report summarizes government assistance programs and presents how much the programs ultimately cost (or benefited) the taxpayers based on straightforward cash accounting as reported by the various agencies. Of the 23 programs reviewed in this report, principal repayment and investment income exceeded initial outlays in 19, principal repayment and income fell short of initial outlays in three, and it is too soon to tell for the remaining one. Of the three programs that lost money, two assisted automakers, not financial firms. Altogether, realized gains across the various programs exceed realized losses by tens of billions of dollars. Although investments in Fannie Mae and Freddie Mac remain outstanding, net income from those investments already exceeds initial outlays. More sophisticated estimates that would take into account the complete economic costs of assistance, such as the time value of the funds involved, are not consistently available. In this sense, cash flow measures overestimate gains to the taxpayers.