TARP Cushioned Blow Of Recession, But Problems Remain Say Officials

By Rachel Christiansen

Treasury Department officials touted the 2008 bank bailout as being somewhat successful during the final hearing held by the congressional panel created two years go to oversee it.

Members of the Congressional Oversight Panel, leading economists and other witnesses discussed the successes and failures of the Troubled Asset Relief Program (TARP) on Friday.

The panel’s chairman, former Senator Ted Kaufman (D-Del.), admitted that TARP was not a complete success, but “in a moment of financial panic, it helped to pull our markets back from the abyss.”

Since it was authorized in 2008, TARP has been criticized by Republicans and Democrats alike for putting Wall Street CEO’s ahead of everyone else. Yet, analysts expect that in the end, the program will have cost taxpayers $25 billion — far less than most initially predicted.

Timothy Massad, Assistant Secretary at the Treasury’s Office of Financial Stability, sung TARP’s praises of bringing major banks out of reaching another Great Depression. 

“TARP helped prevent catastrophic collapse of our financial system and economy,” he said. “In the fall of 2008, we were staring into the abyss. Now we are on the road to recovery.”

Kaufman called the final estimated pricetag of TARP its greatest success. Congress authorized $700 billion for the emergency program in 2008, but has only ended up distributing $411 billion to banks, which in return have paid back roughly $275 billion. Congress expects that an additional $65 billion may be spent before all is said and done.

Massad, however, and others cautioned that TARP should not be viewed as having solved the nation’s economic woes, with unemployment still above 9% and the number of housing foreclosures still very high. In fact, TARP failed mightily when it came to keeping people in their homes, preventing less than 800,000 homes from being foreclosed on. Originally, officials predicted that the program would prevent as many as four million foreclosures.

“It is particularly difficult to label the TARP or any other government-sponsored program aimed at securing financial stability an unqualified success when the unemployment rate hovers around 9 percent, the combined unemployment and underemployment rate equal 16 percent, and millions of American families are struggling to escape foreclosure,” panel member Mark McWatters said.