TARP: Government Bailout Failed in Many Ways, Says Watchdog
WASHINGTON, Jan. 31, 2010 — -- The government's controversial $700 billion bailout program has failed to achieve many of its objectives, a watchdog tells Congress in a new report out Saturday night.
Neil Barofsky, the special inspector general for the Troubled Asset Relief Program (TARP), says in the report that the financial system is stronger today than in the fall of 2008, but he concludes, "Many of TARP's stated goals...have simply not been met."
Consumers and businesses are still struggling to get loans, he says. Small businesses are still waiting for an aid program to start. Homeowners are still grappling with record levels of foreclosures. Unemployment is still 10 percent.
A case in point, says Barofsky: the administration's housing aid program "has only permanently modified a small fraction of eligible mortgages." To date, only 66,000 homeowners have finalized better mortgage terms to help them avoid foreclosure; the administration's program was designed to help 3 to 4 million.
Moreover, Barofsky cautions, the nation remains as vulnerable as ever to flaws in the financial system.
"It is hard to see how any of the fundamental problems in the system have been addressed to date," he says.
So-called too big to fail institutions are now "even larger" than before, the market is "more convinced than ever" that the government will bail out failing firms, Wall Street bonuses this year reveal "little fundamental change" in pay plans compared to past years, and federal efforts to support the housing market "risk reinflating that bubble," says Barofsky.
Voicing concerns about federal aid to the housing sector, he adds, "The government has done more than simply support the mortgage market; in many ways it has become the mortgage market, with the taxpayer shouldering the risk that had once been borne by the private investor."
