Nearly one year after Congress approved the $700 billion financial bailout, it was attacked by Republicans and fiscal watchdogs as an expensive failure that has not stopped home foreclosures or jobs from disappearing.
"This has been a failed program," Sen. Mike Johanns, R-Neb., said at today's Senate Banking committee hearing. "The very promises made to the taxpayer of what was going to happen with this money, in my judgment, have not been kept."
Johanns cited what he called "very damning" testimony by the bailout's Special Inspector General Neil Barofsky that said it is "extremely unlikely" that American taxpayers will get a full return on their $700 billion investment. Moreover, Barofsky observed, the Troubled Asset Relief Program has failed to increase bank lending, stop rising unemployment, or stem the rash of home foreclosures.
"In the last year," said the Congressional Oversight Panel's Elizabeth Warren, "the apprehension that pervaded this country has turned into something else: frustration and anger. Today's fragile stability has come at an enormous cost to the American people." Barofsky noted that "a lot of this frustration and cynicism and anger comes out of the lack of transparency in the TARP program." This, he said, was his group's "biggest frustration" with the Treasury Department and "one of the great failures of the past year."
Lawmakers on both sides of the aisle today felt that frustration first-hand. Sen. Bob Corker, R-Tenn., denounced as useless and unclear the testimony from Treasury official Herb Allison, who oversees the bailout program.
"This hearing has not been very useful," Corker told Allison about 45 minutes into the witness' testimony. "Maybe that's just the way it is, but I look forward to the next panel."
The panel's chairman, Sen. Chris Dodd, D-Conn., then noted sarcastically, "But the questions are valuable."
"I associate myself with Sen. Corker's thoughts," said Sen. Judd Gregg, R-N.H.
Allison attempted to beat back the criticisms by arguing that the program had helped avert the collapse of the financial system last fall. It should not, he said, be viewed only through the prism of what financial returns are eventually seen by American taxpayers.
"It's too early to say how this is going to turn out," he said. "Some areas will probably see better performance than others, but we also have to look at the overall impact of the financial stability program on the American economy, on the banking system, and on the American public in general. I would shudder to think what the situation would be if the Congress and the administrations hadn't taken strong actions to deal with this crisis by, for example, creating the TARP program."
Dodd echoed that assessment, stating that Congress made the right move in enacting the program last October.
"I think we did the right thing and I think history will prove that to be the case," he said.
Watchdog Gene Dodaro of the Government Accountability Office offered a more mixed review.
"It's had some positive impact on the credit markets, but a lot of the programs have very uncertain outcomes at this particular point in time," he said.
Even the recent improvements of the banks – for many an acknowledged success of the program – were questioned today. Warren said the bailout's original purpose – to buy up the toxic assets weighing down banks' balance sheets – was never fulfilled.
"The toxic assets remain on the books of the banks," she said. "The commercial real estate mortgages are a coming crisis. Small banks are continuing to fail. We were talking a year ago about too big to fail. We are now facing an industry that's more concentrated than it was a year ago and too big to fail is up on us now in a much larger sense."
"Until we get down to dirt, to something that's solid, that we can put our feet on, our financial institutions are standing in a secure place, we can't rebuild and know that we are safely past this crisis," Warren said.
"The question about how we're going to get these toxic assets out of here at a time when the real estate mortgage market is still in trouble and the commercial real estate mortgage market may be getting into more and more trouble – I'm not hearing the plan," she said.
Another contentious issue today was whether or not Treasury Secretary Tim Geithner will extend the program until October 2010. At one point, Allison appeared to indicate that the bailout program would likely be extended.
"We still have a long way to go before true economic recovery takes hold," he warned, before later emphasizing on numerous occasions that Geithner has not yet made a decision.