First part of economic rescue a success; now comes the hard part – jobs

Posted by AzBlueMeanie:

The New York Times reports today Audit Finds TARP Program Effective:

The independent [Congressional Oversight Panel] that oversees the government’s financial bailout program concluded in a year-end review that, despite flaws and lingering problems, the program “can be credited with stopping an economic panic.”

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In the latest monthly report released on Wednesday, the panel again criticized the Treasury Department under Secretary Timothy F. Geithner for “failure to articulate clear goals or to provide specific measures of success for the program” as it has morphed over time from rescuing financial institutions to propping up securitization markets, auto manufacturers and home mortgages in danger of default. The panel also described the program’s foreclosure mitigation efforts as inadequate.

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The Treasury’s lack of clarity about the program’s goals, the oversight panel said, made it hard to assess its overall effectiveness. Mr. Geithner is scheduled to testify on Thursday in his quarterly appearance before the five-member panel.

Also making it difficult to gauge the program’s impact, the panel said, is that other forces have helped rescue the financial system and the overall economy, including actions of the Federal Reserve and Federal Deposit Insurance Corp., the $787 billion stimulus program of spending and tax cuts that Mr. Obama and Congress enacted, and similar stimulus efforts by foreign governments.

“Even so,” the panel concluded, “there is broad consensus that the TARP was an important part of a broader government strategy that stabilized the U.S. financial system by renewing the flow of credit and averting a more acute crisis.”

It added, “Although the government’s response to the crisis was at first haphazard and uncertain, it eventually proved decisive enough to stop the panic and restore market confidence.”

The panel’s 134-page report noted that after 14 months of the program, problems remain. Banks resist making loans, toxic mortgage-related assets still clog big banks’ balance sheets and smaller banks are vulnerable to troubles in the commercial real estate sector.

Also, while up to 13 million more home foreclosures are projected over the next five years, the panel said, “TARP’s foreclosure mitigation programs have not yet achieved the scope, scale, and permanence necessary to address the crisis.”

Its conditional good review of TARP coincides with the Treasury Department’s separate report this week that better-than-expected repayments, interest and other returns likely will mean that taxpayers will get back most of the $700 billion used to create TARP.

The bank bailouts are turning a small profit, Treasury said. It anticipated losses through next year of no more than $140 billion—about $200 billion less than forecast just four months ago—on payments extended to auto and insurance companies and for housing programs.

Elizabeth Warren, Chair of the Oversight Congressional Panel, was a guest on Countdown Tuesday night.

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Transcript 'Countdown with Keith Olbermann' for Tuesday, December 8:

OLBERMANN: As for that detested TARP program, the Congressional Oversight Panel that monitors it will release a report tomorrow. Some experts now believe the program will get back more than $500 billion out of its $700 billion funding—far better than originally predicted. And the portion of TARP that went directly to the banks may actually turn out to have broken even.

Let‘s turn now to the chair of that Congressional Oversight Panel, Harvard University law professor, Elizabeth Warren.

Professor, thanks for your time tonight.

ELIZABETH WARREN, CONGRESSIONAL OVERSIGHT PANEL: It‘s good to be here.

OLBERMANN: The president said today, and let me quote it directly, “As galling as the assistance to banks may have been, it indisputably helped prevent a collapse of the entire financial system.” This is a theme of his. But there are two obvious questions that are raised by this statement. The first of them being—is that true?

WARREN: Yes.

OLBERMANN: Then the second obvious question is: How can you prove the negative?  Can it be demonstrated that collapse was prevented?

WARREN: Well, you can never prove the counterfactual. But what we can do is we can look at every trend line we have, and it—this economy was racing toward a cliff and about to pitch over. And the combination of TARP and the work from the Fed and the FDIC and the stimulus, together gave enough reassurance to the market to pull us back from the edge. If nothing else, the U.S. government held up the equivalent of a giant sign that said we are not going to let this financial system collapse, and we will do whatever it takes to stabilize the system—and that calmed everybody down.

So, in that sense, it worked.

OLBERMANN: Has it—has it missed the mark in any great measure? I mean, with an eye towards common sense evaluation versus numbers crunching, has it come anywhere close to affecting average Americans enough? Obviously, the start of this was the—was the issue of credit flexibility and looseness. Has it—has it helped? Does it demonstratively helped average Americans getting an average loan?

WARREN: Well, that‘s where the real problem is.  And that is that it did the first part, it stopped us from the crash.

But this was not a system that—for which the money was supposed to just go to the big financial institutions so they could kind of stay afloat. It was really put into these big financial institutions so that it would help the entire economy, so that it would help us deal with foreclosures, so it would restart credit, so that small businesses wouldn‘t collapse, and in turn, so that employment could stay up, because people would be working at those small businesses, to clean up the balance sheets for the banks.

Those things—they just haven‘t happened.

OLBERMANN: Obviously, nobody is jumping for joy if the mark is still 10 percent unemployment, even if that figure is down from the preceding months. But is there something dynamic about stepping back and looking at all this and saying, “Yes, the economy is improving, and this administration‘s policies have, in fact, contributed to that”?

WARREN: I think that‘s the right way to look at it.  Look, we‘ve been at TARP now for a over a year, just a little over a year.  And this is the moment, with the report we‘re doing right now, to say, let‘s take a deep breath, let‘s back up, and say, the first part was accomplished.  TARP is part of what helped us avoid a depression.

But it‘s time to reassess the rest of those programs. We don‘t want to be in a situation where we get really good at shoveling hundreds of billions of dollars into large banks that we can do that on a—you know, on a seconds notice, and not be able to help stabilize the economy for the American family.

We need to rethink some of these programs, and we need to put some real energy and some real dynamic thought between how—into how it is that we‘re going to use this money to get it into the hands of community banks, to get it into the hands of small businesses, to get ahead of this mortgage foreclosure crisis. That‘s where we have to turn our attention.

OLBERMANN: And, Professor, does the president and in terms of doing something like that, does he need congressional approval to take some of that TARP money and use it on new initiatives? Or is that within the original purview of the idea?

WARREN: OK. I‘m going to be—I‘m going to be a lawyer on you for in a minute here.

OLBERMANN: OK.

WARREN: And the answer is, to the extent that this is—that what he wants to do is stimulate jobs, for example, through the shot of working with the financial institutions in the financial significance system, for example, put more money in the small business loans, which in turn will stimulate hiring. Then the answer is, he absolutely can do it, TARP already has the authorizations in place.  All you‘ve got to do is design a program that does it.

But for anything else, it‘s simply a case of, if he wants to do some kind of stimulus program, not spending the money in TARP means there‘s more money available, but it‘s up to Congress to decide how that money gets spent.

OLBERMANN: Elizabeth Warren, chair of the Congressional Oversight Panel, also of Harvard University, and for a minute there, a lawyer—great thanks for joining us tonight.

WARREN: Thank you.