Firms From Law to Finance Benefit From $1 Billion TARP Expenses

While Treasury Secretary Timothy F. Geithner lauded the government’s sale of American International Group Inc. (AIG) shares this week, the U.S. bailout program reached another milestone.

Expenses from the Troubled Asset Relief Program have passed $1 billion, with more than 70 percent of that going to “financial agents and legal firms,” according to Treasury Department data released Sept. 10. The total paid to the companies as of Aug. 31 was 37 percent more than it was a year earlier.

Companies that have been paid for TARP work include investment firm Houlihan Lokey, which reached a $4.5 million deal in November to advise the Treasury on managing and selling bank stakes, according to a July report by TARP’s special inspector general. Law firm Cadwalader, Wickersham & Taft LLP agreed in 2009 and 2010 to contracts worth about $25 million, most of it for work related to auto-industry bailouts.

TARP was enacted under the George W. Bush administration amid the 2008 financial crisis and continued under President Barack Obama. The government used funds to rescue banks including Citigroup Inc. (C) and Bank of America Corp., and automakers General Motors Co. (GM) and Chrysler Group LLC.

Expenses Fall

While the cumulative costs of operating TARP climb, expenses are falling on an annual basis. The total cost of administering the program was $52.3 million, or 16 percent, less in the 12 months ending Aug. 31 than it was a year earlier, Treasury spokesman Matthew Anderson said in an e-mail.

The administrative costs are 0.27 percent of the $366 billion the government has recovered from TARP. About $417 billion was disbursed.

“TARP has been a very cost-effective program,” Anderson said. “It helped break the back of an historic financial crisis.” He said Treasury is “continuing to cut the administrative budget as we wind down the program.”

The U.S. has recovered its full $182.3 billion commitment to New York-based AIG under the bailout after Treasury’s latest sale this week with a profit. The $15.1 billion return includes results from the Federal Reserve portion of the rescue, such as a credit line and the purchase of mortgage-linked securities.

“Taking action to stabilize AIG during the financial crisis was something the government should never have had to do, but we had no better option at the time to protect the American economy,” Geithner said in a Sept. 10 statement. “To stabilize and then restructure the company with a very substantial positive gain for the American taxpayer is a significant accomplishment.”

To contact the reporter on this story: Ian Katz in Washington at ikatz2@bloomberg.net;

To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net

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