TARP Bailouts Still Taking Place Going Into the 2010 Elections

The federal government is keeping very quiet about the current rounds of bailouts in the nation's banks. With foreclosures still evident, banks are having problems keeping the purchasers of their bonds happy, and things don't seem quite as optimistic in the banking world as the Obama administration suggests:


WASHINGTON (AP) - The Treasury Department says its bank bailouts are over, but the spending continues.

In a Sept. 22 speech, Treasury Secretary Timothy Geithner said the bailouts "are completely behind us."

That's not quite correct. In the final six months in which it could spend money from the Troubled Asset Relief Program, Treasury set aside $243 million for new contracts for law firms, accountants and money managers to help run what's left of the bailouts - on top of the $529 million already spent on work by staff, private companies and other agencies. Many of the contracts last until 2019, and there's nothing to stop the government from hiring even more help if it's needed to chase down the remaining bailout money.

Treasury's authority to spend more from the $700 billion fund expired on Oct. 3. The law requires officials to recoup as much as possible of the $185 billion still in the hands of shaky private companies. After all collections are made, the government expects to be out about $51 billion, mostly from housing programs.

Rising voter anger ahead of next week's elections has made Obama administration officials reluctant to speak candidly about the ongoing cost of managing TARP. Politicians who voted for the TARP law now face tough re-election fights. By downplaying their efforts, officials sidestep criticism of bailouts that helped Wall Street without easing lending or keeping many people in their homes.

A government watchdog said this week that public statements by Treasury officials around the Oct. 3 deadline appeared designed to create a mistaken sense that TARP is over.
"The idea that TARP is dead is just not accurate," said Neil Barofsky, the special inspector general overseeing the program, in an interview. "People can write its obituary, people can declare that it's been put out of its misery, but there's still close to $180 billion of TARP money outstanding, and $82 billion obligated to be spent."

Recapturing the outstanding billions is just as tricky as the work of distributing money to stabilize a financial system rocked by its worst crisis in decades, Treasury's top bailout official said in an interview.

"When you've got $185 billion of investments out there, you don't just say, 'Gee, I'd rather not worry about it,'" Acting Assistant Secretary for Financial Stability Timothy Massad said. "This is work that anyone who looks at it would say, 'If you closed up shop now we'd be much worse off.'"