The Troubled Asset Relief Program (TARP) has an extension.  Treasury Secretary Timothy Geithner announced yesterday that Treasury is extending the bailout program through next October.  TARP was slated to end on December 31 if Geithner didn't trigger the extension.  This decision is sure to spur a new round of debates between those who believe TARP helped stave off economic calamity, those who think it is a waste of federal dollars, and those who believe it worked but now funds should go elsewhere. 

When TARP was launched 14 months ago, Congress tasked the Congressional Oversight Panel with closely watching the use of TARP funds.  And in the latest COP monthly report, the panels' members weigh in on the effectiveness of the program.  And the panel concluded that the data they studied shows that, in the end, the Treasury's actions were "decisive enough to stop the panic and restore confidence among key financial institutions and actors."  But they find it hard to give TARP much credit for fixing any core structural problems in the financial system that may have been responsible for the crisis:

While strong government action helped prevent a worse crisis, it may have done so at a significant long run cost to the performance of our market economy. Implicit government
guarantees pose the most difficult long-term problem to emerge from the crisis. Looking ahead, there is no consensus among experts or policymakers as to how to prevent financial institutions from taking risks that are so large as to threaten the functioning of the nation‘s economy. Congress is currently grappling with this issue as it considers how to respond legislatively to the financial crisis. It is clear that a failure to address the moral hazard issue will only lead to more severe crises in the future.
Since its inception, the TARP has gone through several different incarnations. It began as a program designed to purchase toxic assets from troubled banks but quickly morphed into a means of bolstering bank capital levels. It was later put to use as a source of funds to restart the securitization markets, rescue domestic automakers, and modify home mortgages. The evolving nature of the TARP, as well as Treasury‘s relative lack of fixed goals and measures of success for the program, make it hard to provide an overall evaluation. But the Panel remains convinced, as it has been since its inception, that Treasury should make both its decision-making and its actions more transparent. Despite the difficult circumstances under which many decisions have been made, those decisions must be explained to the American people, and the officials who make them must be held accountable for their actions. Transparency and accountability may be painful in the short run, but in the long run they will help restore market functions and earn the confidence of the American people.

COP Chair Elizabeth Warren explains some of the key findings in the December report in this short video:

Read the full report here.  Go to page 120 for a dissenting view from panel member Rep. Jeb Hensarling (R-TX).