U.S. 'unlikely' to recoup aid to banks

TARP watchdog's report is also critical of secrecy

U.S. taxpayers are "extremely unlikely" to earn any return on the $700 billion government effort to invest in banks and other companies as the financial system teetered on the edge of collapse, according to a quarterly audit of the program.

In a report to Congress, Neil Barofsky, the special inspector general overseeing the Troubled Assets Relief Program, said that recouping the billions of dollars given to insurer American International Group and automakers General Motors and Chrysler "is far from certain." He also noted that $50 billion set aside for helping struggling homeowners lower their mortgage payments will yield "no direct return."

While Barofsky said that the bailout "played a significant role bringing the system back from the brink," he faulted the Treasury Department for not following his recommendations to make the program less secretive. A lack of transparency about the rescue has fueled "anger, cynicism and distrust" among the public, Barofsky noted.

"Despite the aspects of TARP that could reasonably be viewed as a substantial success, Treasury's actions in this regard have contributed to damage the credibility of the program and the government itself," Barofsky wrote in the 256-page report.

The inspector general's office was set up under the October 2008 law that created TARP. It is charged with monitoring the effort along with several other oversight bodies and ferreting out fraud.

The Treasury, which faces a year-end deadline on whether to extend the TARP for another 10 months, had $317.3 billion left to spend as of Sept. 30, according to the report. That figure includes $72.9 billion that has been repaid by 47 firms.

Along with the repayments, the government has made $9.5 billion in interest and dividend payments, plus $2.9 billion from selling warrants that were required as part of the investments.

On Tuesday, Treasury Secretary Timothy F. Geithner said that the administration would end some of the biggest TARP programs in coming weeks, including the one that made capital injections into large banks.

The report notes that 46 banks given aid have missed required dividend payments and owe the Treasury a total of $75.7 million.

"The purpose of TARP has always been to stabilize and revive the economy, not to make the government an active investor on behalf of the taxpayer," Treasury spokesman Andrew Williams said. "We are pleased that over $70 billion has already been repaid, with more coming in, but we are now focused on winding down programs that are becoming less essential and exiting these investments as soon as is practicable."