- The Washington Times - Saturday, January 31, 2009

We may never know whether the government’s $700 billion bailout of the financial industry worked, according to a new report from congressional auditors.

That’s because it will be impossible to sort out which of the government’s spending and other tinkering has made a difference, according to the report released Friday by the Government Accountability Office.

The report covers Treasury’s administration of the bailout, called the Troubled Asset Relief Program, through Jan. 23. Nearly $294 billion had been released by that date — almost $200 billion of it through a program to inject capital directly into financial institutions.

The roughly $200 billion in capital injections doesn’t include any of the separate money authorized to guarantee losses for Bank of America Corp. and Citigroup Inc., or about $20 billion to stabilize automakers Chrysler and General Motors Corp.

“Even with more time and better data, it will remain difficult to separate the impact of TARP activities from the effect of other economic forces,” the report said.

Recent moves to improve oversight of the money hadn’t gone far enough, according to the report. Treasury introduced a plan to survey the 20 largest participating firms each month following an earlier GAO report that blasted the program’s lack of transparency.

More information about how the money was divided and how recipients spent it was still necessary, the new report said.

The report also said Treasury had “taken important steps” to address nine recommendations from the earlier report, which included calls to improve communication about the bailout and hire staff to oversee it. But the department had not fully addressed eight of the recommendations.

“The lack of a clearly articulated vision has complicated Treasury’s ability to effectively communicate to Congress, the financial markets, and the public on the benefits of TARP,” the report said.

Also Friday, officials including Treasury Secretary Timothy Geithner, Federal Reserve Chairman Ben S. Bernanke and Federal Deposit Insurance Corp. Chairman Sheila Bair were meeting to discuss overhauling the bailout program and other financial and regulatory reforms.

Officials have been considering several programs, including a government-run “bad bank” that would buy up troubled assets clogging banks’ balance sheets, and additional guarantees against losses like those granted to Bank of America and Citigroup. Additional capital injections also are possible.

Since these plans could cost more than the $350 billion remaining from the $700 billion bailout, Treasury may have to ask Congress for more money to help stabilize the financial system.

The administration also has said it plans to spend up to $100 billion of the remaining money to help homeowners facing foreclosure.

Administration officials said they expect an announcement on these plans sometime next week.

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