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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 White House is set to appoint Elizabeth Warren to head up the new Consumer Financial Protection Bureau , just as her work as chair of the Congressional Oversight Panel appears to be coming to an end. Members of COP issued what may be their last monthly report, as the Troubled Assets Relief Program is set to expire October 3. If this is a final report card on TARP, the grade seems to be Incomplete . Any evaluation must recognize its own limitations. This report is necessarily an interim evaluation, because the effects of the TARP and of the financial crisis are still unfolding. Experts and observers can use theoretical models and data available to provide estimates and expectations, but a complete perspective comes only with time and significant, objective data, neither of which is fully available at this date. Further, the specific effect of the TARP will always be difficult to isolate. The TARP was but one of an unprecedented number of government responses, which included significant liquidity programs by the Federal Reserve,increased deposit insurance by the FDIC, and the government absorption of Fannie Mae and Freddie Mac. Both now and in the future, however, any evaluation must begin with an understanding of what the TARP was intended to do. Congress authorized Treasury to use the TARP in a manner that “protects home values, college funds, retirement accounts, and life savings; preserves homeownership and promotes jobs and economic growth; [and] maximizes overall returns to the taxpayers of the United States.”390 But weaknesses persist. Since EESA was signed into law in October 2008, home values nationwide have fallen. More than seven million homeowners have received foreclosure notices. Many Americans‟ most significant investments for college and retirement have yet to recover their value. At the peak of the crisis, in its most significant acts and consistent with its mandate in EESA, the TARP provided critical support at a time in which confidence in the financial system was in freefall. The acute crisis was quelled. But as the Panel has discussed in the past, and as the continued economic weakness shows, the TARP‟s effectiveness at pursuing its broader statutory goals was far more limited. The theme of the TARP's unpopularity, or its "stigma", runs throughout the report. And the ultimate conclusion appears to be that this stigma, whether fully deserve or not, will harm similar efforts in the future: It is possible that rigorous economic evaluations of the TARP, based on new data and the additional perspective that comes with time, will reverse or soften the stigma currently associated with the program. It is equally possible, however, that future studies will instead support and elaborate upon the negative assessments of the program. Whatever the result, policy-makers can only benefit from detailed data-based analysis. The TARP program is today so widely unpopular that Treasury has expressed concern that banks avoided participating in the CPP program due to stigma, and the legislation proposing the Small Business Lending Fund, a program outside the TARP, specifically provided an assurance that it was not a TARP program. Popular anger against taxpayer dollars going to the largest banks, especially when the economy continues to struggle, remains high. The program‟s unpopularity may mean that unless it can be convincingly demonstrated that the TARP was effective, the government will not authorize similar policy responses in the future. Thus, the greatest consequence of the TARP may be that the government has lost some of its ability to respond to financial crises in the futur e. Read the report, and an executive summary, 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 .

Members of the Congressional Oversight Panel --tasked by Congress to provide oversight of the Treasury Department's actions in managing the Troubled Assets Relief Program (TARP)--"applaud" what they see as Treasury's improved response to the foreclosure crisis, but say that "even now Treasury’s programs are not keeping pace with the foreclosure crisis." Here's an excerpt from COP's latest monthly report: Despite Treasury’s efforts, foreclosures have continued at a rapid pace. In total, 2.8 million homeowners received a foreclosure notice in 2009. Each foreclosure has imposed costs not only on borrowers and lenders but also indirectly on neighboring homeowners, cities and towns, and the broader economy. These foreclosures have driven down home prices, trapping even more borrowers in a home that is worth less than what they owe. In fact, nearly one in four homeowners with a mortgage is presently underwater. Although housing prices have begun to stabilize in many regions, home values in several metropolitan areas, such as Las Vegas and Miami, continue to fall sharply. Treasury’s response continues to lag well behind the pace of the crisis. As of February 2010, only 168,708 homeowners have received final, five-year loan modifications – a small fraction of the 6 million borrowers who are presently 60+ days delinquent on their loans. For every borrower who avoided foreclosure through HAMP last year, another 10 families lost their homes. It now seems clear that Treasury’s programs, even when they are fully operational, will not reach the overwhelming majority of homeowners in trouble. Treasury’s stated goal is for HAMP (Home Affordable Modification Program) to offer loan modifications to 3 to 4 million borrowers, but only some of these offers will result in temporary modifications, and only some of those modifications will convert to final, five-year status. Even among borrowers who receive five-year modifications, some will eventually fall behind on their payments and once again face foreclosure. In the final reckoning, the goal itself seems small in comparison to the magnitude of the problem. COP Chair Elizabeth Warren introduces the April report in this video: Read the full report here .

In its February report, the Congressional Oversight Panel looks at the threat commercial real estate losses pose to financial stability. Between 2010 and 2014, about $1.4 trillion in commercial real estate loans will reach the end of their terms. Nearly half are at present ―"underwater"– that is, the borrower owes more than the underlying property is currently worth. Commercial property values have fallen more than 40 percent since the beginning of 2007. Increased vacancy rates, which now range from eight percent for multifamily housing to 18 percent for office buildings, and falling rents, which have declined 40 percent for office space and 33 percent for retail space, have exerted a powerful downward pressure on the value of commercial properties. The largest commercial real estate loan losses are projected for 2011 and beyond; losses at banks alone could range as high as $200-$300 billion. The stress tests conducted last year for 19 major financial institutions examined their capital reserves only through the end of 2010. Even more significantly, small and mid-sized banks were never subjected to any exercise comparable to the stress tests, despite the fact that small and mid-sized banks are proportionately even more exposed than their larger counterparts to commercial real estate loan losses. The report goes on to point out that the larger danger comes if there are widespread defaults and we see hotels, stores, and office complexes closing. All of that would have a direct negative impact on jobs. COP Chair Elizabeth Warren discusses the dangers in her monthly report: Read the full February COP report here .

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 .

In its September report, the Congressional Oversight Panel (COP) looks into the impact of the use of TARP funds to keep US automakers Chrysler and GM from going under. The panel looked first at whether Treasury broke any rules in bailing out the companies, and found that the government's behavior was "largely in line with the practices of other large bankruptcies," and that no bankruptcy laws were broken. But there are now added concerns about how the intersection of politics and business puts the government in a tricky situation as part owner of the automakers. And COP, predictably, is calling for more transparency: American taxpayers now own 10 percent and 61 percent of the new Chrysler and GM companies respectively. Treasury's support for the automotive industry differed significantly from its assistance to the banking industry. The bulk of the funds were available only after the companies had filed for bankruptcy, wiping out their old shareholders, cutting their labor costs, reducing their debt obligations and replacing some top management. The government's role raises serious oversight issues, particularly Treasury's conflict between competing objectives. The Panel recommends that, to mitigate the potential conflicts and political issues inherent in owning Chrysler and GM shares, Treasury should take exceptional care to explain its decision making and provide a full, transparent picture of its actions. The Panel also recommends that Treasury consider placing its GM and Chrysler shares in an independent trust that would be insulated from political pressure and government interference. You can read the full report here . Also, COP chair Elizabeth Warren speaks about the September report in this video: