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Obama budget sees $117 bln in bailout losses

Senate staff members pick up copies of U.S. President Barack Obama's 2011 Budget as it is distributed on Capitol Hill in Washington February 1, 2010. REUTERS/Jonathan Ernst/Files

WASHINGTON (Reuters) - The Obama administration lowered its estimate of taxpayer losses from the federal bailout program to $117 billion in its fiscal 2011 budget plan from a $141 billion loss estimate made in early December.

The revised loss estimates, down from a $341 billion loss estimated in August 2009, reflect significant repayments of investments in banks, higher values for Treasury investments and terminations of asset guarantees.

The face value of obligations from the $700 billion Troubled Asset Relief Program will fall from $541.5 billion in fiscal 2009 to $272 billion in fiscal 2010 and $234.2 billion in fiscal 2011, according to the budget proposal.

“The governnment is exiting from its emergency financial policies and taxpayers are being repaid,” the administration said in the budget proposal. “Indeed, the ultimate cost of these policies is likely to be significantly lower than previously expected.”

The proposal projected that the Treasury’s $248 billion in bank investments would produce a positive return for taxpayers.

But there were still losses projected for investments in insurer American International Group, the U.S. auto industry and for a program to modify mortgages for struggling homeowners.

The budget proposals showed that the total “subsidy cost” of TARP, including administrative and interest costs associated with the extra debt taken on to fund the program, is now $126.7 billion.

The budget proposal also attributed a deficit reduction of $114.5 billion due to TARP re-estimates in fiscal 2010, including $104.7 billion in lower losses and $9.9 billion in reduced interest costs.

Among TARP outlays still growing are costs associated with the Home Affordable Modification Program. These costs are expected to reach $48.8 billion through fiscal 2011 compared to about $27 billion as of the end of November. Unlike bank and other invwstments, the mortgage modification program is not expected to produce a direct, positive return for taxpayers.

Reporting by David Lawder, Editing by W Simon