The US government’s US$700 billion bailout program helped stabilize the financial system, but has done little to boost lending or stave off millions of home foreclosures, a government watchdog group said yesterday.
In its new monthly report on the Troubled Asset Relief Program (TARP), the Congressional Oversight Panel declined to take a stand on whether US Treasury Secretary Timothy Geithner should extend the program beyond the end of this year.
The 14-month-old bailout fund, which has propped up banks, automakers and insurer American International Group, has failed to resolve key problems in the financial system, including toxic assets still weighing down bank balance sheets, a sharp contraction of credit and the moral hazard associated with bailouts, the panel said.
“Consequently, the United States continues to face the prospect of banks too big to fail and too weak to play their role adequately in keeping credit flowing throughout the economy. The foreclosure crisis continues to grow,” the panel said in its report.
The report concluded that the stability that markets have enjoyed this year was not solely because of TARP, but to an extraordinary mix of government support, including Federal Deposit Insurance Corp and Federal Reserve asset guarantees.
“The removal of this support too quickly could undermine the economy’s nascent stability,” it said, without concluding whether Geithner should continue the program through Oct. 2 next year.
The administration of US President Barack Obama has signaled an extension by considering the use of TARP funds to spur small business lending and possible other programs to boost job creation, a move opposed by many Republicans.
The oversight panel’s lone sitting member of Congress, Representative Jeb Hensarling, a Texas Republican, voted against approval of the panel’s report but agreed with certain criticisms. He called for TARP to be shut down at year-end.
“One can not help but conclude that TARP is failing its mandate,” Hensarling said in a statement.
He added that the Treasury’s bailout of General Motors, Chrysler and GMAC were “abuses,” while TARP’s foreclosure mitigation efforts were “misguided.”
Indeed, the report from the oversight panel, headed by Harvard Law School professor Elizabeth Warren, also criticized TARP programs aimed at stemming foreclosures, saying they “have not yet achieved the scope, scale and permanence to address the crisis.”
It said that foreclosure starts over the next five years were projected to range from 8 million to 13 million, excluding many more homeowners that have lost homes to short sales or simply walked away from their mortgages.
That number is far larger than the 3 million to 4 million homeowners that the TARP foreclosure mitigation program aims to aid.
“Even if every best-case scenario that Treasury has made came true, we’re dealing with only about a third of the foreclosures,” Warren told reporters in a conference call.
She added that the Treasury was far from reaching its goals, with less than 5 percent of mortgage modifications having achieved permanently lower payments. The risk of these loans redefaulting remained high as long as the homes remain worth less than their mortgages, she said.
“Reducing loan principal is the only way to eliminate negative equity, so Treasury should consider how its existing programs might be adapted in ways that result in principal reductions,” the panel said in the report.
Archeologists in Peru on Thursday said they found the 5,000-year-old remains of a noblewoman at the sacred city of Caral, revealing the important role played by women in the oldest center of civilization in the Americas. “What has been discovered corresponds to a woman who apparently had elevated status, an elite woman,” archeologist David Palomino said. The mummy was found in Aspero, a sacred site within the city of Caral that was a garbage dump for more than 30 years until becoming an archeological site in the 1990s. Palomino said the carefully preserved remains, dating to 3,000BC, contained skin, part of the
‘WATER WARFARE’: A Pakistani official called India’s suspension of a 65-year-old treaty on the sharing of waters from the Indus River ‘a cowardly, illegal move’ Pakistan yesterday canceled visas for Indian nationals, closed its airspace for all Indian-owned or operated airlines, and suspended all trade with India, including to and from any third country. The retaliatory measures follow India’s decision to suspend visas for Pakistani nationals in the aftermath of a deadly attack by shooters in Kashmir that killed 26 people, mostly tourists. The rare attack on civilians shocked and outraged India and prompted calls for action against their country’s archenemy, Pakistan. New Delhi did not publicly produce evidence connecting the attack to its neighbor, but said it had “cross-border” links to Pakistan. Pakistan denied any connection to
TRUMP EFFECT: The win capped one of the most dramatic turnarounds in Canadian political history after the Conservatives had led the Liberals by more than 20 points Canadian Prime Minister Mark Carney yesterday pledged to win US President Donald Trump’s trade war after winning Canada’s election and leading his Liberal Party to another term in power. Following a campaign dominated by Trump’s tariffs and annexation threats, Carney promised to chart “a new path forward” in a world “fundamentally changed” by a US that is newly hostile to free trade. “We are over the shock of the American betrayal, but we should never forget the lessons,” said Carney, who led the central banks of Canada and the UK before entering politics earlier this year. “We will win this trade war and
Armed with 4,000 eggs and a truckload of sugar and cream, French pastry chefs on Wednesday completed a 121.8m-long strawberry cake that they have claimed is the world’s longest ever made. Youssef El Gatou brought together 20 chefs to make the 1.2 tonne masterpiece that took a week to complete and was set out on tables in an ice rink in the Paris suburb town of Argenteuil for residents to inspect. The effort overtook a 100.48m-long strawberry cake made in the Italian town of San Mauro Torinese in 2019. El Gatou’s cake also used 350kg of strawberries, 150kg of sugar and 415kg of
RSS