WASHINGTON - Treasury Secretary Timothy Geithner is telling Congress that the administration believes the final cost of the government's heavily criticized financial bailout effort could be as low as $87 billion.
Geithner made the new estimate in a letter Friday to congressional leaders. A year ago, officials were estimating the bailout could cost as much as $500 billion.
The new estimate said the biggest losses will occur from the government's support of mortgage companies Fannie Mae and Freddie Mac. That loss was put at $85 billion, followed by a loss of $49 billion from providing help to homeowners facing foreclosures.
Geithner's letter estimated that the government would lose $48 billion through the support provided to insurance giant American International Group and another $28 billion would be lost through the billions of dollars in assistance provided to General Motors, Chrysler and their auto financing arms.
The biggest offset to those losses will be earnings of $115 billion that the administration expects the Federal Reserve to realize from the extraordinary assistance it has given to provide liquidity to the financial system.
Geithner said the new lower estimate would be the equivalent of less than 1 percent of GDP and would reduce projections for the federal deficit and the total national debt.- AP