The Troubled Asset Relief Program deserves a thumbs-up when it comes to its overall price tag, but the efficacy of the program has produced far more mixed results, according to TARP oversight panelists.
The unpopular bailout program was hailed by several members of the Congressional Oversight Panel on TARP for its shrinking price tag. The Congressional Budget Office once estimated the program would cost the government at least $350 billion — its most recent estimate puts that number as low as $25 billion.
On strictly the price front, Treasury Secretary Timothy Geithner told panelists that TARP has developed into "one of the most effective crisis response programs ever implemented."
"We have brought stability to the financial system and the economy at a fraction of the expected costs. We have returned the financial system to private hands far more quickly than anyone would have thought possible," said Geithner in his prepared testimony. "Thanks to a comprehensive and careful strategy to address the financial crisis, we are in a much stronger position to address our still very substantial remaining economic challenges."
"Today, we know that the panic ended, and you played a key role in that turnaround," said former Sen. Ted Kaufman (D-Del.).
In fact, all federal efforts to stifle the financial crisis, including efforts to rescue Fannie Mae and Freddie Mac and steps taken by the Federal Reserve and Federal Deposit Insurance Corporation, will amount to less than one percent of the gross domestic product, according to Geithner. That "incredibly small" amount is less than one-third of costs incurred by the government during the savings-and-loan crisis, which was much milder, he added.
However, disappointments still linger around the program. Although the panelists said TARP played a key role in ending the panic surrounding the financial crisis, the persistent negative public perception of the program and its relative inability to spur lending to small businesses and help homeowners trying to avoid foreclosures remain disappointments.
"The consensus among the academic economists and other experts we consulted was that TARP played an important role in helping to end the financial crisis," said Kenneth Troske, William B. Sturgill professor of economics at Kentucky University. "To the general public, TARP remains one of the most vilified pieces of legislation ever enacted."
"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 nears 10 percent, the combined unemployment and underemployment rate equals 17 percent, and millions of American families are struggling to modify their mortgage loans so as to avoid foreclosure," said J. Mark McWatters, a Dallas attorney and certified public account who replaced Rep. Jeb Hensarling (R-Texas) on the panel.
Damon Silvers, director of policy and special counsel to the AFL-CIO, took Geithner to task for the administration's inability to help a substantial amount of homeowners avoid foreclosure.
However, while the economy still needs assistance, particularly when it comes to unemployment and the housing sector, it now falls on other governmental efforts, as TARP's contributions have largely come to an end, Geithner said.
"TARP now has done what it had to do," he said. "The burden for achieving a more rapid pace of growth ... is going to have to come through other policy instruments."
The government's efforts to relieve struggling homeowners, including the TARP's Home Affordable Modification Program, are still under way, but Geithner stressed that while the worst of the financial crisis is over, "substantial damage" is still left in its wake.
"It's going to take years, not months, years to fully repair the damage caused by this crisis," he said.