Treasury Secretary Timothy Geithner announced today that he would extend the Troubled Asset Relief Program, or TARP, until next October, as per his authority. TARP has been in the news lately because its final price tag to the US government has been revised downward by $200 billion dollars. The Obama Administration is talking about using some of that savings for a new jobs bill. While most of this would be indirect – there would be a new appropriation for the jobs bill, but the impact to the deifict would be cancelled out by the savings on TARP – some of it could be direct, like efforts to speed lending to small businesses. That’s probably one of the major reasons for extending the TARP.

An audit of the TARP finds that the program has been only narrowly effective in protecting the banking industry, while doing little to stem the tide of foreclosures or reduce unemployment.

In the latest monthly report released on Wednesday, the panel again criticized the Treasury Department under Secretary Timothy F. Geithner for “failure to articulate clear goals or to provide specific measures of success for the program” as it has morphed over time from rescuing financial institutions to propping up securitization markets, auto manufacturers and home mortgages in danger of default. The panel also described the program’s foreclosure mitigation efforts as inadequate […]

Also making it difficult to gauge the program’s impact, the panel said, is that other forces have helped rescue the financial system and the overall economy, including actions of the Federal Reserve and Federal Deposit Insurance Corp., the $787 billion stimulus program of spending and tax cuts that Mr. Obama and Congress enacted, and similar stimulus efforts by foreign governments.

“Even so,” the panel concluded, “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.”

Talking about rescuing the banks and just referring to TARP is like talking about a hot fudge sundae by only referring to the cherry. The Fed and the FDIC have taken far more aggressive actions.

David Dayen

David Dayen