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Treasury Secretary Timothy Geithner tackles five myths about TARP

Investors in those institutions that didn't survive were wiped out. Investors in those that did faced substantial losses. Where firms could not finance themselves and the government was forced to take a large stake, our investments came with conditions that forced fundamental restructuring.

The firms that remain are less leveraged and hold much more capital (or financial reserves) against risk. They were forced by the stress tests we conducted to demonstrate that they could raise equity from private investors on the strength of their businesses.

4. The TARP worsened the concentration of the banking sector, leaving it more vulnerable to another crisis.

It is true that the financial system is more concentrated today than it was before the crisis. This was unavoidable, but our banking system is still much less concentrated than the systems of every other major country and represents a smaller share of our economy. We have 7,800 banks, not two or five, and we are less dependent on banks overall for credit, with securities markets and other financial institutions providing roughly half of all credit to businesses and individuals.

More important, the financial reforms enacted by Congress in the Dodd-Frank Act created stronger protections for consumers and against excessive risk-taking than existed before the crisis. They include greater transparency, tight limits on size and further concentration, and a clear prohibition on taxpayer-funded bailouts.

5. The TARP was the centerpiece of a strategy by President Obama to assert more government control over the economy.

The TARP was created by a conservative Republican president, who was also forced by the crisis to take over Fannie Mae and Freddie Mac, lend billions to the automobile industry and guarantee money-market funds. And the TARP was championed by the same Republican congressional leaders who are in office today. They deserve more credit for the courage they showed than they seem willing to accept now.

Before President Obama took office, the Bush administration committed nearly $300 billion under the TARP, including investments in banks representing more than three-quarters of the entire sector, two of the three big American car companies and AIG. That support was critical to preventing a complete system collapse, but it also represented a level of government involvement in our economy not seen since the Great Depression.

President Obama adopted a strategy designed to get the government out of the private sector as quickly as possible. To date, we have recovered more than $200 billion in TARP funds, as well as made $28 billion in profits. Our remaining investments in banks are a small fraction of what we inherited. And, in the end, 90 percent of that once-feared $700 billion TARP price tag either will not have been spent or will be returned to the taxpayers.

We will exit the AIG and automotive industry investments much faster than anyone predicted. General Motors is planning an initial public offering for later this year, and AIG has announced a restructuring plan that will accelerate the timeline for repaying the government.

The TARP is over. And as we put it behind us, it is worth noting that the financial security of all Americans is much stronger today than it would have been without the rescue strategy that the program made possible. It worked.

Timothy F. Geithner is secretary of the Treasury.

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