WASHINGTON (Reuters) - The Treasury’s man in charge of the government’s $700 billion financial bailout program has two words for congressional overseers: It worked.
Testifying at the Congressional Oversight Panel’s final hearing on Friday, Treasury bailout chief Timothy Massad said the program “brought stability to the financial system and laid the foundation for economic recovery.”
The much-maligned Troubled Asset Relief Program is estimated to cost taxpayers $25 billion -- a far cry from initial projections -- and even some of the program’s harshest critics admit it helped pull markets “back from the abyss.”
“Today the panic of 2008 is a slowly fading memory, and the TARP played a role in turning the page on that grim chapter in American history,” said former Democratic Senator Ted Kaufman from Delaware, the chairman of the congressional panel.
Major Wall Street banks such as Bank of America Corp, Goldman Sachs Group Inc and Citigroup Inc have long repaid the government, and the Treasury Department has recapitalized American International Group Inc, although it still holds a 92 percent stake in the insurer.
But TARP also has many open sores, including the Obama administration’s housing rescue program.
The administration initially predicted the TARP-funded Home Affordable Modification program would help up to 4 million at-risk homeowners to avoid foreclosure. But in nearly two years of operation, the program has provided permanent loan modifications for only a little more than 600,000 homeowners.
The congressional panel estimated that HAMP will prevent fewer than 800,000 foreclosures in total.
“It is no wonder, then, that many Americans view the TARP as a program designed and executed for the benefit of Wall Street CEOs rather than Main Street homeowners,” said Kaufman.
In congressional testimony on Wednesday, the bailout program’s outgoing auditor, Neil Barofsky, offered his latest critique of the administration’s marquee housing aid program and questioned whether it was a good use of taxpayer funds.
Republicans in the U.S. House of Representatives have vowed to kill HAMP, although Democrats argue that offering some help is better than offering none.
The Congressional Oversight Panel, which was once chaired by the outspoken consumer advocate Elizabeth Warren, has held nearly 30 hearings since TARP was created in October 2008.
Congress created the $700 billion fund at the height of the financial crisis, when markets were cratering. Officials feared the global financial system was on the brink of collapse.
The fund was initially targeted to stabilize Wall Street financial firms, but it was later used to prop up the auto sector as well.
During Friday’s hearing, oversight panel members and their witnesses said the estimated cost of the program should not be the sole metric of it success or failure.
“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,” said Mark McWatters, an attorney and certified public accountant who sits on the panel.
“We should remain mindful that the TARP’s overall contribution to the rescue of the U.S. economy was relatively modest when considered along with the ... bailout of Fannie Mae and Freddie Mac,” he said.
TARP funds were not used to prop up mortgage companies Fannie Mae and Freddie Mac, but the government-controlled companies have taken more than $134 billion in direct taxpayer aid.
Nobel Prize-winning economist Joseph Stiglitz agreed the bailout program helped pull financial markets back from the edge, but said it has done very little for the economy.
“TARP and the recovery of troubled assets were not ends in themselves, but means to an end, namely the recovery of the economy,” Stiglitz said.
In that ultimate objective, he added, TARP has “been a dismal failure.”
Reporting by Rachelle Younglai; editing by Dan Grebler