Yesterday, the Office of the Special Inspector General for the Troubled Assets Relief Program (SIGTARP) issued its latest Quarterly Report to Congress. The report uses the two-year anniversary of TARP to offer an “interim assessment” of the extent to which TARP has succeeding in meeting the goals set for it by Treasury, and at what cost such success has come.

The report notes that, although Treasury’s authority to initiate new TARP investments expired on October 30, 2010, a significant milestone for the program, TARP is far from at its end. Indeed, over $178 billion in TARP funds are still outstanding as of October 3, 2010, and funds already obligated to existing TARP programs may still be expended.

The report states that TARP has fulfilled the goal of “avoiding a financial collapse” and in doing so helped facilitate a “swift and striking turnaround” and “return to profitability” for large Wall Street banks and financial institutions. According to the report, “Main Street” America has also benefited significantly from the prevention of the collapse of the financial industry and major automobile manufacturers and increased stock market prices.

However, the report also points out that in certain significant areas, TARP has thus far fallen far short of meeting its stated objectives. TARP has unequivocally failed to increase lending and small businesses still find it difficult to secure credit. Despite billions of TARP funds provided to banks with the explicit purpose of increasing lending, overall ending continues to contract. TARP has also been unable to meet the goal of promoting jobs and economic growth. The national unemployment rate is currently approximately 9.6%, some 3.0% higher than at the onset of TARP, and the national poverty rate has increased from approximately 13.2% in 2008 to approximately 14.3% in 2009.

The report concludes that, with respect to the aim of preserving homeownership, the most clearly defined of TARP’s goals for Main Street, the program has thus far been a disappointment. According to the report, TARP’s portion of the Home Affordable Modification Program (HAMP) has produced approximately 207,000 (out of a total of 467,000) ongoing permanent mortgage loan modifications, figures which pale in comparison to the over 5 million home which have received foreclosure filings and the more than 1.7 millions home which have been lost to foreclosure since January 2009.

The report reiterates that “increased moral hazard” and “concentration in the financial industry” continue to define TARP’s legacy. As a consequence of TARP, the largest banks in the nation are now larger than ever, and “too big too fail” banks have gained a significant advantage due to the well reinforced perception that the US Government is still unwilling to let such institutions fail.

The report also discusses what it calls a “fundamental non-financial cost” to TARP: the potential for the program to cause long-term damage to the credibility of the federal government. The report points out that may Americans still regard TARP with “anger, cynicism and mistrust,” and that much of the pervasive hostility towards the program is “based upon entirely legitimate concerns about the lack of transparency, program mismanagement and flawed decision-making process” that the report says have plagued the program.