TARP Inspector General: Same Road, Faster Car

James Gattuso / February 01, 2010

In an unusually harsh report released yesterday, the government’s Special Inspector General for TARP blasted the bailout program, charging that it has not only failed to meet its goals, but that — absent change — it may have made things worse.

Among other things, Inspector General Neil Barofsky concluded that because of the bailouts, the market is “more convinced than ever that the Government will step in as necessary to save significantly significant institutions.” This, he says, creates a moral hazard, through what he calls a “heads I win; tails, the Government bails me out,” mentality. The recent extension of TARP for another year only reinforced that moral hazard, by “permitting Treasury to maintain a war chest of potential rescue funding…” (more…)