Tales from Bailout Nation Pt. XVI

Troubled assets tied to the housing market remain frozen on banks' balance sheets and pose a continued threat to economic recovery, according to a new oversight report.

Elizabeth Warren, chairwoman of the Congressional Oversight Panel charged with ensuring that bailout funds are used properly and efficiently, said in her report that efforts to move housing-related derivatives off banks' books have mostly failed.

"The nation's banks continue to hold on their books billions of dollars in assets about whose proper valuation there is a dispute and that are very difficult to sell," Warren wrote.

The panel pointed to setbacks in implementing the Public Private Investment Program, a government program to help banks unload the assets, as a leading contributing factor.

The segment of it administered by the Treasury has only recently got off the ground, the panel noted, while the Federal Deposit Insurance Corp. has postponed its own effort, citing improved liquidity in the credit markets.

Perhaps one of the reasons the TARP program isn’t working is that the Treasury Dept. doesn’t know what the hell they are doing.

Recall that the original intent of the TARP program when it was initiated under the Bush administration last year was to buy up these very toxic assets only for that goal to be dropped earlier this year in favor of recapitalizing the financial institutions in order to get them to start lending to one another.

So, it really should come as no surprise to anyone that the original intent of the program which has since been dropped isn’t quite as effective as hoped.

And to buttress the rudderless ship of fools approach being taken by Treasury here’s Warren on the TARP program back in June:

There's no discussion of the overall policy. Instead, there are specific programs that are announced, and from that, it's necessary to reason backwards to figure out what the goal must have been. It's like a "Jeopardy!" game. If this is the answer, what was the question? It's frustrating because without a clearly articulated goal and identified metrics to determine whether the goal is being accomplished, it's almost impossible to tell if a program is successful.

We’re in the very best of hands.