Congress put American taxpayers on the hook for $700 billion last year when it approved the massive bailout to paper over the imprudent lending decisions of nine Wall Street giants: Bank of America, Citigroup, Wells Fargo, JP Morgan Chase, Goldman Sachs, Morgan Stanley, Merrill Lynch, State Street and the Bank of NY Mellon. The bailout was essential to save the nation from a complete economic meltdown. Or so insisted President George W. Bush, Treasury Secretary Hank Paulson, Senate Majority Leader Harry Reid and House Speaker Nancy Pelosi.
One year later, however, a little-noted report by the U.S. Government Accountability Office (GAO) questions whether the bailout — known officially as the Troubled Asset Relief Program (TARP) — saved anything other than the jobs of greedy Wall Street executives and the political hides of their protectors in government.
“Measuring the effectiveness of TARP’s programs has been an ongoing challenge,” the GAO report said, adding that “any changes attributed to TARP could well be changes that would have occurred anyway” — due to policy interventions, the actions of financial regulators, or even natural market corrections. In other words, a year after Congress burdened present and future taxpayers with a debt of immense magnitude, government auditors still can’t say for sure that TARP accomplished anything toward preventing a financial collapse.
At the height of the bailout hysteria, Paulson appeared on “Face the Nation,” saying he hoped the federal government would be able to recoup most of the TARP funds. But today, both the GAO’s auditors and TARP Inspector-General Neil Barofsky say nobody should hold their breath waiting for that repayment. In his 256-page report to Congress, Barofsky notes that the Treasury Department’s failure to implement anti-fraud measures, or even to require TARP recipients to report how they used the billions Congress and the Treasury Department gave them, makes it highly unlikely that the $317 billion outstanding — nearly half the TARP total — will ever be returned to taxpayers. Barofsky also threatened to subpoena documents relating to the Treasury Department’s “less-than-accurate statements … concerning TARP’s first investments in nine large financial institutions,” as well as its subsequent refusal to report what hundreds of other TARP recipients did with the funds.
So there you have it: Treasury officials lied to Congress and the public, and refused to demand even a basic level of accountability from TARP recipients while borrowing hundreds of billions of dollars that taxpayers will eventually have to pay back, plus billions in interest. Incredibly, just Wednesday, President Barack Obama announced a new TARP-like program for small businesses and community banks. The madness in Washington won’t stop until the people completely clean house at both ends of Pennsylvania Avenue.