WASHINGTON — The Obama Administration argued Friday that the government's response to the financial crisis has been unfairly maligned and is likely to earn money for taxpayers.
In a 24-page document released to reporters, the Treasury Department said the economy is stronger today because of the combined crisis-era actions of Treasury, the Federal Reserve and the Federal Deposit Insurance Corp, during both the Bush and Obama administrations.
"In addition, the latest available estimates indicate that the financial stability programs are likely to result in an overall positive financial return for taxpayers in terms of direct fiscal cost," the document states.
The administration's latest analysis hinges heavily on its estimate that through fiscal year 2015, the Fed will return $179 billion in excess earnings to the Treasury Department, beyond what it would have generated in normal economic times.
The analysis does not include one bottom-line number on the expected gain to taxpayers, and it does include a number of caveats. For example, it does not include the fiscal cost of tax cuts and economic stimulus that were enacted in response to the financial crisis.
Treasury's background briefing with reporters came the same week that Mitt Romney wrapped up the GOP presidential nomination, but senior Treasury officials insisted that their effort to change perceptions about the government's crisis response was not about politics.
Instead, they argued that it will be harder for policymakers to make difficult decisions in a future crisis if the public is convinced that the response to the last crisis was a failure.
Included in Treasury's calculations were the cost of the Troubled Asset Relief program, which will earn a gain on its investment in banks but is expected to result in a net loss largely as a result of funds spent to rescue Chrysler and General Motors and to help troubled homeowners.
Also included in the analysis were the rescues of Fannie Mae and Freddie Mac, which the Obama Administration projects will result in a net cost to taxpayers of $28 billion through fiscal year 2022.
Treasury also included an estimate that it will earn a total of $26 billion from its money market fund guarantee program and its mortgage-backed securities purchase program.
Treasury's claim that the bottom line to the taxpayer is likely to be in the black relies on its decision to count, as part of the overall government response to the crisis, its estimate of the Fed's excess earnings.
"Total excess earnings form the Federal Reserve expected to be remitted to the general fund are currently forecast to reach $179 billion through fiscal year 2015," the analysis states. "The amount of future Federal Reserve earnings is uncertain and will depend on future financial and economic conditions."
Treasury officials also presented a range of other data that they say vindicate the policy choices made in 2008 and 2009.
For example, they argued that the banking system is much safer than it was during the crisis, with banks having added nearly $400 billion in new capital, and the four largest banks less reliant on short-term funding than they were in 2008.
The officials who spoke to reporters did acknowledge some disappointments, particularly with regard to Obama Administration's response to the foreclosure crisis.
When the administration's mortgage modification program was introduced in 2009, officials estimated that it would help 4 million-5 million homeowners, but the program has not come close to meeting that goal.
A senior Treasury official attributed the problems to several factors, including an overly optimistic estimate of the number of people who were eligible for assistance and what the official called a broken mortgage servicing industry.
The official also suggested that the public had unrealistic expectations about the government's ability to fix the housing mess, attributing to the Obama Administration powers that it did not have.