Treasury Secretary Tim Geithner made a number of important observations during his testimony before the Congressional Oversight Committee. The most outstanding of these is how much money from the TARP investment has been returned to taxpayers. The Treasury Secretary said that more than half of the funds lent through the program have been paid back along with $24 billion in additional revenue.

Under the Capital Purchase Program, which provided most of the money to banks, 75% of the money has been returned along with $21 billion for dividends and warrants.

The good news was nearly lost because Geithner’s testimony was largely political. He praised the program, which he has overseen since he took office, as a success. It has stabilized the credit system, he said, and encouraged banks to begin lending to small businesses and consumers again. However, there is no evidence that businesses and people have been helped at all. For the most part, banks have used the TARP money to support their capital structures. This has allowed them to make money on commercial lending, investment banking, and proprietary trading.Geithner failed to acknowledge the debt he owes his predecessor Henry Paulson, who created TARP, and Ben Bernanke, who helped push the program through Congress.

The TARP winds down in October, so Geithner has begun to give it a place in history based on his perspective. Hidden fairly far into his testimony are references to American International Group (NYSE: AIG), which taxpayers invested $180 billion, along with GM and Chrysler. AIG, Geithner said, will probably never make back the money that the government invested. He did not mention what the Congressional Oversight Committee has said are the government’s profound mistakes in the bailout of AIG. These include not seeking private capital to help the large insurer and not pressing its financial partners such as Goldman Sachs Group (NYSE: GS) to take cents on the dollar for what AIG owed them. Geithner may have skipped over these things because he was head of the New York Fed when the AIG “work-out” was fashioned, and had a large role in the decisions about the government’s investment.

The car companies exist in a world well outside the core of the financial bailout. It is only a guess that the government might have been better off selling their assets to Toyota or VW. The IPO of GM may get a great deal of the taxpayer investment in Detroit back.

Geithner’s legacy will always be tainted by the botched AIG investment, which seems to have favored the large financial firms which were the insurance company’s clients. That is not all. TARP was not Geithner’s program. He is only its steward, the steward of a system in which his only real role was the AIG decision.

Douglas A. McIntyre

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