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When Congress created the Troubled Asset Relief Program in the fall of 2008, it also established the Congressional Oversight Panel to keep an eye on the Treasury 's actions, and effectiveness, in meting out TARP dollars. On April 3, COP will close up shop, as mandated in the legislation that created TARP. From October 2008 on, COP has released a monthly report on TARP actions. The 30 reports provide a compelling historical record of TARP, and of the federal government's response to the Global Economic Crisis. This final report is a comprehensive one--a summary of Treasury's efforts. And it reads as a tough-but-fair report: In order to evaluate the TARP‘s impact, one must first recall the extreme fear and uncertainty that infected the financial system in late 2008. The stock market had endured triple digit swings. Major financial institutions, including Bear Stearns, Fannie Mae, Freddie Mac, and Lehman Brothers, had collapsed, sowing panic throughout the financial markets. The economy was hemorrhaging jobs, and foreclosures were escalating with no end in sight. Federal Reserve Chairman Ben Bernanke has said that the nation was on course for "a cataclysm that could have rivaled or surpassed the Great Depression." It is now clear that, although America has endured a wrenching recession, it has not experienced a second Great Depression. The TARP does not deserve full credit for this outcome, but it provided critical support to markets at a moment of profound uncertainty. It achieved this effect in part by providing capital to banks but, more significantly, by demonstrating that the United States would take any action necessary to prevent the collapse of its financial system. Some of the more interesting themes of the report include the public stigma that COP says "burdened" the Treasury Department: Because the TARP was designed for an inherently unpopular purpose - rescuing Wall Street banks from the consequences of their own actions - stigmatization was likely inevitable. Treasury's implementation of the program has, however, made this stigma worse. For example, Treasury initially insisted that only healthy banks would be eligible for capital infusions under the CPP. When it later became clear that some TARP-recipient banks were in fact on the brink of failure, all participating banks, even those in comparatively strong condition, became tainted in the public eye. Further, many senior managers of TARP-recipient institutions maintained their jobs and their substantial salaries, and although shareholders often suffered meaningful dilution, they were not wiped out. To the public, this may appear to be evidence that Wall Street banks and bankers can retain their profits in boom years and shift their losses to taxpayers during a bust - an arrangement that is anathema to market discipline in a free economy. And transparency (or lack thereof): Beginning with its very first report, the Panel has repeatedly expressed concerns about the lack of transparency in the TARP. In too many cases, especially in late 2008 and early 2009, Treasury either declined to release information that it possessed about the program or declined to require TARP-recipient institutions to reveal information about their use of taxpayer funds. In perhaps the most profound violation of the principle of transparency, Treasury decided in the TARP's earliest days to push tens of billions of dollars out the door to very large financial institutions without requiring banks to use the funds in any particular way or even reveal how the money was used. As a result, the public will never know to what purpose its money was put. Other transparency problems include Treasury's refusal to explain how it valued the stock warrants it received in exchange for its TARP investments and the joint failure of Treasury and the Federal Reserve to disclose enough details of the 2009 stress tests to permit the results to be duplicated or challenged by outside parties. Read the full report here . Here is COP Chair Ted Kaufman introducing and summarizing the final report:

The Congressional Oversight Panel has released its November report. This month the panel explores the potential impact of "mortgage irregularities" and "foreclosure mitigation" on the mortgage market and the economy. The panel took a close look at some of the foreclosure practices of banks, especialy the practice of "robo-signing" foreclosure related affidavits. From the release: If documentation problems prove to be pervasive and throw into doubt the ownership of pooled mortgages, the consequences could be severe. Borrowers may be unable to determine whether they are sending their monthly payments to the right people. Judges may block any effort to foreclose, even in cases where borrowers have failed to make regular payments. Multiple banks may attempt to foreclose upon the same property. Borrowers who have already suffered foreclosure may seek to regain title to their homes and force any new owners to move out. Would-be buyers and sellers could find themselves in limbo, unable to know with any certainty whether they can safely buy or sell a home. Further wide-scale disruptions in the housing market, if they arose, could cause significant harm to financial institutions. For example, if a Wall Street bank were to discover that, due to shoddily executed paperwork, it still owns millions of defaulted mortgages that it thought it sold off years ago, it could face billions of dollars in unexpected losses. To put in perspective the potential problem, the mortgage-backed securities market totals approximately $7.6 trillion, so irregularities that affect even a small percentage of this market could have dramatic effects on bank balance sheets - potentially posing risks to the very financial stability that the Troubled Asset Relief Program was designed to protect. The Panel urges Treasury and bank regulators to undertake new "stress tests" to gauge the ability of major financial institutions to cope with a potential documentation-related crisis. COP chair Sen. Ted Kaufman discusses the report in this video: Read the full report here.

The Congressional Oversight Panel 's June Report is now out, and in it the members of the panel are critical of the federal government's rescue of AIG in September, 2008. First, the panel argues that the Hank Paulson led Treasury Department did not do its due diligence in examining all the options it had before it committed $85 billion of taxpayer funds to keep the insurance giant from collapsing. But their bigger criticism comes with the actual rescue plan, which COP members say shifted the burden of AIG's failings from its creditors to all taxpayers and "distorted the marketplace by transforming highly risky derivative bets into fully guaranteed payment obligations." From the report: In the ordinary course of business, the costs of AIG‟s inability to meet its derivative obligations would have been borne entirely by AIG‟s shareholders and creditors under the well-established rules of bankruptcy. But rather than sharing the pain among AIG‟s creditors – an outcome that would have maintained the market discipline associated with credit risks – the government instead shifted those costs in full onto taxpayers out of a belief that demanding sacrifice from creditors would have destabilized the markets. The result was that the government backed up the entire derivatives market, as if these trades deserved the same taxpayer backstop as savings deposits and checking accounts. One consequence of this approach was that every counterparty received exactly the same deal: a complete rescue at taxpayer expense. Among the beneficiaries of this rescue were parties whom taxpayers might have been willing to support, such as pension funds for retired workers and individual insurance policy holders. But the across-the-board rescue also benefitted far less sympathetic players, such as sophisticated investors who had profited handsomely from playing a risky game and who had no reason to expect that they would be paid in full in the event of AIG‟s failure. Other beneficiaries included foreign banks that were dependent on contracts with AIG to maintain required regulatory capital reserves. Some of those same banks were also counterparties to other AIG CDSs. Here is COP chair Elizabeth Warren discussing the key findings of the June report: Read the full report here .

In December, Treasury Secretary Timothy Geithner announced that his department is extending the Troubled Assets Relief Program through October 3, 2010. So with less than ten months to go, part of the Treasury's responsibility will be to manage the end of TARP. But as the Congressional Oversight Panel's January report points out, the impact of TARP will be felt for long after October. And in their January report, the COP members call on Treasury to be more transparent in the department's effort to "unwind its stake in the financial markets": As Treasury enters the next stage of its administration of the TARP, it must learn from the mistakes it has made in the past – in particular, its failure to follow the money used to bail out large financial institutions. Because Treasury never required the institutions that received the first infusions of TARP funding to account for their use of these funds, taxpayers have not had a clear understanding of how their money has been used. As Treasury embarks on new programs, it must require that future recipients provide much greater disclosure of their use of TARP dollars. Finally, and perhaps most significantly, the TARP has raised the long-term challenge of how best to eliminate implicit guarantees. Belief remains widespread in the marketplace that, if the economy once again approaches the brink of collapse, the federal government will inevitably rush in to rescue financial institutions deemed too big to fail. This belief distorts prices, giving large financial institutions an advantage in raising capital that mid-sized and smaller banks – those not too big to fail – do not enjoy. These implicit guarantees also encourage major financial institutions to take unreasonable risks out of the belief that, no matter what happens, taxpayers will not allow their failure. So long as markets continue to believe that an implicit guarantee exists, moral hazard will continue to distort prices and endanger the nation’s economy, even after the last TARP program has been closed and the last TARP dollar has been repaid. Here is COP Chair Elizabeth Warren discussing the January report: Read the full report here .

This weekend marked 12 months since the Treasury Department launched the Troubled Assets Relief Program. In that time, nearly $450 billion of the $700 billion in TARP funds have been distributed. Here's a look at how much money has flowed to whom: (H/T CNN Money's David Goldman and his article TARP: Taxpayers on the hook for $200 billion .)

The Treasury Department has allowed 10 banks to exit the Troubled Assets Relief Program (TARP), by paying back the funds they received last year. Some have looked at this as a strong sign that the US banking system is well on its way toward recovery. But the Congressional Oversight Panel (COP)--established to evaluate the effectiveness of TARP--wants to be sure that the American taxpayer is not losing out in the process. After all, taxpayers put up the money for TARP, and assumed significant risk in the process. Theoretically, taxpayers are entitled to a return on their investment. From the COP July Report: When Congress authorized the commitment of $700 billion to rescue the financial system, it decided that taxpayers should have the opportunity to share in a potential upside if the banks returned to profitability. The opportunity to profit from TARP investments comes through special securities called warrants. Banks that received financial assistance were required to give the government warrants for the future purchase of some of their common shares. Simply put, warrants are the right to buy shares of a company at a set price at some point in the future. For example, a warrant might allow Treasury to buy shares of a bank for ten dollars at any time in the next ten years. If the share price rises above ten dollars, Treasury could pay less than market value for the shares, then sell them and turn a profit. In this way, the banks were repaying the taxpayers for their investment by sharing some of their future profitability. Now some members of the panel are concerned that the early repayment might cut taxpayers out. COP Chair Elizabeth Warren explains: Read the full COP July Report here .

There has been much discussion of the bank bailout funds this week--and some of it is good news for those who want financial insitutions to start giving back. Goldman Sachs and JP Morgan want to repay their TARP money. And earlier this week Treasury Secretary Geithner says he expects $25 billion of the TARP funds to be repaid by the end of the year. So where does that money go? According to The Explainer -- Slate 's Christopher Beam --the money goes back into the program: If a bank wants to return its TARP money, it gets siphoned back—by wire, usually—into the original pool. In his testimony, Geithner said there's $110 billion left of the original $700 billion allocated by the TARP program. So once the expected $25 billion is returned, the remaining stash should reach $135 billion. The return of the money seems like a good thing all around. But The Explainer points out there is a downside: Of course, there are risks to letting the banks return money. One is that they'll need it again, which would create a public relations snafu. Then there's a systemic risk problem: If one bank appears stronger than others, the weaker ones might get hurt as investors yank their money, and short sellers bet against them. That's why Geithner is insisting on completing the stress test—which measures the banks' strength—before deciding which big companies get to return their money. Read The Explainer's full explanation here . And track the returned money at Slate's Tarp-O-Meter here .