The Congressional Oversight Panel has issued its latest report on how the government’s huge bailout of the financial system is going. The most startling part of the document is that it describes the federal government’s $4.5 trillion guarantee of financial assets which put huge sums of taxpayer money at risk and, according to the panel, created a significant “moral hazard” which could encourage banks to return to risky behavior in anticipation that the government will always provide them with a safety net.
The panel has good things to say about the Treasury’s recent reaction to the credit crisis because its analysis of the department’s actions point to an aggressive attempt to get taxpayer money back from the financial firms which got federal support. Its analysis shows that the only program which has lost a great deal of money so far is the FDIC. It remains to be seen how money put into the country’s largest banks will do.
While the report takes a great deal of space dealing with the legal and accounting issues of TARP and other programs, it is an encouraging picture of how the Administration took huge risks to save the financial system, but then methodically worked to get the capital back.
Douglas A. McIntyre
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