NEW YORK (CNNMoney.com) -- Treasury Secretary Tim Geithner outlined the benefits of the government's bailout of the financial system Thursday, saying that the overall cost will be a "fraction" of the original estimate.
Geithner told the Congressional Oversight Panel that the cost of TARP, the Troubled Asset Relief Program, will be no more than the amount spent on the program's housing initiatives.
"The remainder of the investment programs under TARP -- in banks, AIG, credit markets, and the auto industry -- will likely, in the aggregate, ultimately yield a positive return for taxpayers," he said.
The government created the $700 billion program at the height of the financial crisis in 2008. But the cost of TARP has been significantly reduced in the years since, as the economy has stabilized and investments made under the program have become profitable.
"Because of the success of the program, TARP is likely to cost a fraction of that amount," he said. The bailout, he said, "will rank as one of the most effective crisis response programs ever implemented," in terms of direct financial cost.
The Congressional Budget Office estimated last month that TARP will cost taxpayers $25 billion, down from a previous projected cost of $109 billion in March.
Geithner said he thinks the final cost will be below the CBO's estimate. "I think it's a little high," he said about the $25 billion projection. Although he acknowledged much of it depends on how the government's housing initiatives play out, among other things.
TARP, enacted under the Bush Administration, was initially intended to stabilize the banking system by buying or backing "troubled assets." It subsequently evolved into a broader effort to rescue the economy and prop up the housing market.
The bulk of the remaining cost of TARP stems from the bailout of insurance giant AIG and the auto industry, as well as efforts to prevent foreclosures, according to CBO. Those programs cost about $45 billion, while other transactions resulted in a net gain of $20 billion for taxpayers. Why we still hate the banks
Geithner said the economy has made "substantial progress" since the recession ended last year. But he acknowledged that significant challenges remain for the economy and the financial system.
"We are still living with the scars of this crisis, and both our financial system and the economy as a whole continue to show signs of significant damage" he said.
While household wealth has begun to recover, Geithner noted that many families are still struggling with high unemployment and financial stress. The housing market "remains weak" and small businesses are still under pressure, even as larger companies have returned to profitability, he said.
"It's going to take years -- years -- to repair the damage," he said.
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