Report: TARP cost government in credibility

"The American people's belief that the funds went into a black hole, or that there was a transfer of wealth from taxpayers to Wall Street, is one of the worst outcomes of this program, and that is the reputational damage to the government," said Neil Barofsky in a 256-page report, USA Today reported Wednesday.

TARP -- the Trouble Asset Relief Program -- was assembled in the fall of 2008 as a plan for the U.S. Treasury to buy frozen assets from banks to free up credit for consumers and businesses and reduce foreclosure rates.

Instead of purchasing frozen assets, the government invested in 685 banks, which helped banks recover from collapsing share values, the report says.

The report also says the $50 billion federal program to assist banks in modifying mortgages "will yield no direct results."

Forty-seven financial companies have returned $72.9 billion in TARP funding, but Barofsky said it was "highly unlikely" taxpayers would recoup $77 billion given to the auto industry or $60 billion given to American International Group.

Copyright 2009 by United Press International.