As Troubled Asset Relief Program ends, opinions mixed about results of plan

As the TARP comes to an end, its director has deemed the bank bailout a success. In remarks to the Congressional Oversight Panel at its final hearing on TARP, Timothy Massad, the program’s director, said Troubled Asset Relief Program gave the government the means to fend off a devastating meltdown of the financial system. However, some panel members, citing unemployment, housing and economic recovery, said TARP was not almost effective enough.

Troubled Asset Relief Program considered by Treasury to be successful

Finally, on March 4, the TARP was finally finished. About $411 billion was spent to bail out homeowners that had foreclosure risks to them, the U.S. auto industry and even the Wall Street banks. The Congressional Oversight Panel for Troubled Asset Relief Program had a presentation given by Timothy Massad who’s the assistant secretary for the Treasury Department's Office of Financial Stability. He said that the U.S. government had no other option but to use TARP to keep out of a depression, which worked. Congress authorized $700 billion for Troubled Asset Relief Program at the height of the financial crisis in October 2008. About $475 billion will ultimately be spent. Initially, the cost to working class individuals was projected at $341 billion, but TARP is estimated to end up costing just $25 billion. Big Wall Street banks, for instance Goldman Sachs, Citigroup and B of A, have paid back their bailout money. About $277 billion in TARP money was already paid bac! k to the government.

Troubled Asset Relief Program is a dysfunction, states critics

The Congressional Oversight Panel pointed out the severely underperforming TARP-funded Home Affordable Modification Program as evidence that government bailout funds benefited Wall Street however left the rest of America in the lurch. The administration said two years back that HAMP would help several Americans. About 4 million homeowners facing foreclosure would be helped through the program. However, only about 600,000 homeowners have received loan modifications to date. The oversight panel estimated that the program would prevent less than 800,000 foreclosures, information House Republicans are using to justify killing HAMP. Massad does not like this idea. He warned against it. He pointed out that the economy is not getting any better right now. Several homeowners would be left in the dust if the program were to end.

The moral hazard with TARP

Critics of TARP on the oversight panel contend that TARP condoned moral hazard by assuring Wall Street banks that they are indeed “too large to fail.”. The Wall Street banks know that in the future they’ll be bailed out. This is why they’ll continue to maximize profits with unnecessary risks. TARP critics refused to acknowledge Massad’s claim that TARP was successful because the banking system has returned to the status quo, joblessness remains unacceptably high and the U.S. economy remains weak. Troubled Asset Relief Program was a "dismal failure" in accordance with Nobel Laureate on the oversight panel Joseph Stiglitz.

Articles cited

Market Watch

marketwatch.com/story/treasury-tarp-ranks-among-best-crisis-responses-2011-03-04

ABC News

blogs.abcnews.com/thenote/2011/03/treasury-official-praises-tarp-expresses-concern-for-housing-sector.html

Reuters

reuters.com/article/2011/03/04/usa-financial-bailout-idUSN0422157520110304?pageNumber=2