When the Treasury introduced the Troubled Assets Relief Program late last year, the government guaranteed the values of  hundreds of billions of dollars in bank assets. The move was made, to put it very simply, to prevent a panic and protect the assets of millions of American taxpayers.  The Congressional Oversight Panel, in its November report, concludes that the federal guarantees did that successfully.  But the report also shows that the guarantees now account for the "single largest element of the government's response to the financial crisis," and that raises some timely questions for Treasury:

These guarantee programs also created significant moral hazard. Guarantees create price distortions and can lead market participants to engage in riskier behavior than they otherwise would. In addition to the explicit guarantees analyzed in the Panel's report, the government's broader economic stabilization effort may have signaled an implicit guarantee to the marketplace: the American taxpayer stands ready to provide a financial backstop for certain markets and large market players to avert possible economic collapse. To the degree that investors, lenders and borrowers believe that such an implicit guarantee remains in effect, moral hazard will continue to distort the market.

The extraordinary scale of these guarantees, the significant risk to taxpayers, and the corresponding moral hazard leads the Panel to conclude that these programs should be subject to extraordinary transparency. The Panel specifically identified the guarantee of Citigroup assets under AGP -- the largest single guarantee offered to date -- and strongly urges Treasury to provide regular, detailed disclosures about the status of the assets backing up this guarantee. Treasury should disclose greater detail about the rationale behind guarantee programs, the alternatives that may have been available and why they were not chosen, and whether these programs have achieved their objectives. This should include an analysis of why Citigroup and Bank of America were selected for AGP and not others.

Here is COP Chair Elizabeth Warren introducing the November report:

You can read the full report here.