October 21, 2009 / 1:00 PM / 8 years ago

US watchdog says TARP helped stabilize system

1 Min Read

WASHINGTON, Oct 21 (Reuters) - The U.S. government's $700 billion financial rescue program has helped to stabilize the system, but may be creating systemic problems by fueling a belief banks will always be bailed out, a watchdog for the program said on Wednesday.

"Compared to where we were last October there is no question that the system if far more stable. We were on the precipice and I think the (Troubled Asset Relief Program) contributed with the other programs to pull us back," Neil Barofsky, the special inspector general for the program, told CNBC.

"But I do think because of the moral hazard, because of some systemic risks that are associated with making these institutions bigger and bigger ... systemically we may be in a more dangerous place even then we were a year ago," he said. (Reporting by Tim Ahmann, Editing by Chizu Nomiyama)

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