TARP Bids Farewell to Chrysler

Yesterday, Treasury announced that it would be selling its 6.6 percent equity stake in Chrysler to Fiat, which represents the last outstanding TARP investment in the company, which has been receiving assistance from the program since January 2009.

The move is expected to bring in about $600 million in proceeds, which would bring the amount of funds recovered from Chrysler up to $11.2 billion. TARP has committed $12.5 billion to the company, but Treasury says it's unlikely they will get back the full $1.3 billion difference.

Treasury's full exit from Chrysler is just one move that the Administration has been making in its efforts to wind down TARP's remaining investments. Last week, Chrysler also repaid a $5.1 billion loan and terminated its ability to draw another $2.1 billion. The repaid loan was scheduled to mature in 2017, so the repayment came six years early.

In addition, Treasury sold 200 million shares of AIG common stock for proceeds of $5.8 billion the same day as the Chrysler repayment last week. The sale reduced Treasury's holdings of common stock to 1.455 billion shares and reduced its ownership stake in the company from 92 percent to 77 percent. CBO's March 2011 Report on TARP anticipated that the AIG investment program would cost taxpayers $14 billion in total.

Another small move that the Administration announced yesterday is the sale of securities that back the Small Business Administration's 7(a) loans. TARP invested $368 million in these 7(a) securities starting in March of last year. It's not clear how much this sale will bring for the Treasury, but either way, it likely will not impact TARP's overall cost much.

As a side note, the latest projection for TARP's cost is $19 billion (down from a $356 billion estimate in April 2009). It's unclear if these moves will push that cost estimate further down.

TARP is clearly winding down, so we will keep you posted on further developments. Also, check out Stimulus.org to stay updated on what is happening with TARP and other economic recovery measures the government has taken.