Washington : The Treasury Department will own billions of dollars worth of financial assets when a taxpayer-financed bailout programme is over and has not set clear principles for disposing them, a government watchdog agency said yesterday.
The Congressional Oversight Panel's monthly report on the Troubled Asset Relief Programme takes a critical view of the Treasury's strategy for exiting the bailout, saying a scheduled October 3 termination will not really be the end at all.
"After Treasury completes all of its TARP purchases, it will hold a massive pool of financial assets likely worth hundreds of billions of dollars, and the process of unwinding some of these holdings may continue for a number of years," the panel said.
It cited Treasury holdings at year-end of TARP-related assets including $58 billion (Dh212b) of bank preferred securities, $25 billion of Citigroup common stock, $46.9 billion of American International Group preferred stock and $61 billion of shares and debt in carmakers General Motors and Chrysler.
As well, Treasury has other assets under a Public-Private Investment Programme that buys toxic assets and says it will buy more assets under a small business initiative programme.
The panel says that Treasury has set out three principles for deciding when to sell its holdings but says they are so vague that they are useless. The principles include keeping the financial system stable, preserving stability of financial institutions and maximising returns on taxpayer investments.
"The principles as announced are so broad that they provide Treasury with a means of justifying almost any decision," the panel said. A Treasury spokeswoman responded that Treasury was taking "a cautious, transparent and disciplined approach" to winding down emergency programmes and said taxpayers will get a profit from money that was invested in propping up banks.
