That seems to be the bottom line of a government watchdog report on economic recovery released the same day that Treasury Secretary Timothy Geithner announced an extension of TARP until October of next year. The independent Congressional Oversight Panel, created last year to keep an eye on the $700 billion Troubled Asset Relief Program, said Wednesday that the sometimes beleaguered program played a big, if difficult to calculate, role in reviving the U.S. economy.
"There is broad consensus that the TARP was an important part of a broader government strategy that stabilized the U.S. financial system by renewing the flow of credit and averting a more acute crisis," the panel said. "Although the government's response to the crisis was at first haphazard and uncertain, it eventually proved decisive enough to stop the panic and restore market confidence."
Paul Sancya, AP
A job fair in Livonia, Michigan in November.
But echoing a host of recent comments from President Barack Obama, Federal Reserve Chairman Ben Bernanke and other officials, the panel also said that "despite significant improvement in the financial markets, however, the broader economy is only beginning to recover from a deep recession, and the TARP's impact on the underlying weaknesses in the
financial system that led to last fall's crisis is less clear."
The report adds to the economic debate in Washington at a turning point for fiscal policy as well as the economy, a debate that shifted with the unemployment report out last week that showed much less damage to the job market in October than in any month since the financial crisis began.
Bernanke and other Fed officials, who meet to discuss monetary policy next week, have begun to publicly agonize about when and how to raise interest rates and drain some of the massive amounts of capital the Fed pumped into the credit markets at a time when businesses and consumers were unable to borrow money. And Obama has begun to talk about using some of the expected $200 billion in unused TARP money on new job-creation programs and to pay down the deficit.
Hours after the panel's report came out, the president met with congressional Democratic and Republican leaders to discuss the economy and then told reporters it was time to "wind down" TARP, even as he noted the need to keep it going through next year.
"It's a sign of how tough times are that the best job report in two years still shows a loss of 11,000 jobs," Obama said.
A big problem in unwinding TARP, or creating the kind of "exit strategy" that both Bernanke and Geithner have mentioned, is that policy makers are having a tough time judging its effects on the economy as a whole. "Because so many different forces and programs have influenced financial markets over the last year, TARP's effects are impossible to isolate," the panel said.
Making that assessment tougher is that TARP's goals aren't very clear, the panel added. The program began as an effort to purchase toxic assets from banks so they could again feel free to lend. But then it shifted into an effort to bolster bank capital levels as an end in itself, then a source of funds for the markets that securitize loans, then a means to help the floundering automakers, and then a way to save some homeowners who couldn't pay off their mortgages.
Sluggard credit markets, ailing bank balance sheets, bank failure, home foreclosures and of course unemployment continue to be major problems. Add such global worries as the renewed financial crises in Dubai and Greece, and you get an even more uncertain battlefield for the country's economic generals to command.
Geithner, who was criticized by the panel for a lack of Treasury transparency -- which the panel has complained about every month since TARP's creation -- will testify before the panel tomorrow on the administration's new strategy for TARP.
