Report: Treasury essentially gave banks $78B

WASHINGTON -- The federal government overpaid tens of billions of dollars for stocks and other assets in its massive bailout last year of Wall Street banks and financial institutions, a study by a government watchdog says.

The Congressional Oversight Panel, in a report released Friday, said last year's overpayments amounted to a taxpayer-financed $78 billion subsidy of the firms.

The findings added to the frustrations of lawmakers already wary of the $700 billion rescue plan, known as the Troubled Asset Relief Program. Congress approved the plan last fall, but members of both parties criticized spending decisions by the Bush administration and former Treasury Secretary Henry Paulson.

"Now there could be lots of policy reasons that Treasury might decide that it wanted this money to be in the banks," panel chairwoman Elizabeth Warren said Friday morning on CBS. "But our question is the one we put to Secretary Paulson, and that is, 'Are you putting it in and getting back assets that are worth equivalent value?' He told us yes; our independent investigation said no."

The misgivings come as Treasury Secretary Timothy Geithner is preparing to place the Obama administration's imprint on the program with a sweeping new framework for helping banks, loosening credit and helping reduce foreclosures. Geithner plans to unveil the changes Monday.

And while Paulson is gone and Geithner is in charge, the program itself is still in the hands of Neel Kashkari, a holdover from the Bush administration.

In December, Kashkari defended the Treasury purchasing strategy.

"We're not day traders, and we're not looking for a return tomorrow," he said. "Over time, we believe the taxpayers will be protected and have a return on their investment."

In a bright spot for the rescue program, the same banks that received capital infusions from Treasury have already paid $271 million in dividends to the federal government and are expected to pay $1.5 billion more in dividends by the end of this month. Wells Fargo, which received a $25 billion infusion, has already announced it would pay Treasury $371 million in dividends this month.