Yesterday, the Congressional Oversight Panel (COP) released its September report on the Troubled Asset Relief Program (TARP) approximately two weeks before it is scheduled to expire. On December 9, 2009, the COP issued a similar report in anticipation of TARP’s original scheduled expiration on December 31, 2009 in an attempt “to gauge the program’s overall effectiveness.” At that time, panelists concluded that though the government’s measures under TARP were “an important part” of the “strategy that stabilized the U.S. financial system,” TARP’s corrective effects on the fundamental weakness that precipitated the near systemic crash were “less clear.”
Shortly, after the release of the COP’s December report, Treasury Secretary Timothy Geithner exercised his authority to extend the program until October 3, 2010. In this report, the COP concludes that, although TARP provided “critical government support” to the financial system at the peak of the crisis, administrators have not successfully followed their congressional mandate to use the program in a manner that “protects homes, college funds, retirement accounts and life savings, preserves homeownership and promotes jobs and economic growth; [and] maximizes overall returns to the taxpayers of the United States.”
Indeed, the report notes that home values have dropped 28% and stock indices, which are reflective of many Americans’ largest investments for college and retirement, have fallen 30% since TARP was first authorized in 2008. The report also noted that when Secretary Geithner extended TARP, he indicated that Treasury was in significant part preserving its authority to help avert further turmoil should the markets show continued signs of actual vulnerability. Treasury introduced little additional funding to address foreclosures, small bank capitalization and the securitization market. The report concludes that the result has been a widespread “stigma” related to TARP, fueled by growing public anger arising from concerns that TAPR has served to benefit Wall Street banks and other major corporations while doing little for the average citizen.
While the panelists acknowledge that valid debate continues over TARP’s legacy, the report asserts that “Unless the program’s effectiveness can be convincingly demonstrated, the government will not authorize similar policy responses in the future.” Thus, the report concludes that one overriding result of TARP may be that the government “has lost some of its ability to respond to financial crises.”
The COP states that it will continue to evaluate these and other major issues related to TARP and will review specific TARP programs monthly until the COP’s statutory authority expires on April 3, 2011.