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Trillions of taxpayer money fails to bail out US economy

10 April 2009 11:22 (UTC +04:00)

Baku. Vahab Rzayev â€“ APA-Economics. A congressional panel overseeing the U.S. financial bailout said that though some measures taken by the government are making its mark on the economy, the financial crisis "is far from over" despite the government’s commitment to spend trillions of taxpayer money on a massive bailout of the financial system, RTTNews reported.

The Congressional Oversight Panel, in a report released Tuesday said the Treasury may be depending too much on a favorable economic scenario to guide its USD 700 billion bailout, and declared that the success of the program after six months is "mixed."

It said that the government has spent, lent or set aside more than USD 4 trillion through the Troubled Asset Relief Program (TARP), the Federal Reserve and the Federal Deposit Insurance Corporation.

Today, the credit markets no longer face an acute "systemic crisis in confidence" that threatens the functioning of the economy, the report said, but the economy now faces an "apparently prolonged period of weakness" with regard to financial firms and lending.

It said while Citigroup and Bank of America received multiple infusion of capital from the government, borrowing costs for businesses and individuals remain high. The panel also noted with concern increasing numbers of home foreclosures and lower home prices.

The panel suggested that getting rid of top executives and liquidating problem banks may be a better way to solve the economic crisis.

All successful efforts to address bank crises have involved the combination of moving aside failed management and getting control of the process of valuing bank balance sheets, the panel, headed by Harvard Law School Professor Elizabeth Warren, said in its report.

The panel criticized the Treasury Department for failing to identify what yardsticks it will use to determine whether its rescue programs are working.

"If you don’t articulate what the metrics are going out ... you can’t know if anything succeeded or failed," Warren said. She also criticized the Treasury for its lack of openness on its rescue efforts as it first began the TARP program last year.

"As Treasury started this program," she said, "they really had the notion that they would spend the money the way they wanted, and not only were they not going to tell the public, I don’t think they were going to tell the Congressional Oversight Panelâ€”the body charged with overseeing the government’s Troubled Asset Relief Program (TARP), the $700 billion plan aimed at bailing out the country’s financial sector."