Oversight Panel Cites Global Impact Of TARP Funds

In a regular TARP oversight report, Elizabeth Warren, head of the Congressional Oversight Panel, says a lot of the money that went to banks in the TARP program "appears likely" to have gone overseas, far more than foreign bailout money came here. She says it's not possible to know for sure because of the way TARP was set up, and the global nature of the financial markets today.

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A lot of the money that the federal government poured into its bank rescue program probably ended up overseas. That's the conclusion of a report issued today by a congressional panel overseeing the Troubled Asset Relief Program, or TARP. It says the government needs to do a better job tracking funds flowing to foreign banks. More now from NPR's Jim Zarroli.

JIM ZARROLI: Many of the major countries of the world took steps to rescue their banks during the financial crisis that peaked in 2008. But the report says the programs varied greatly from place to place.

Countries like France and Germany rescued only the most troubled banks, most of which happened to do little business in the United States. But Elizabeth Warren, chairman of the oversight panel, says the U.S. government spread its net much more widely, pouring money into more than 700 financial institutions of all kinds.

Warren says many of these had significant ties to foreign investors, and when the U.S. government gave them money, much of it essentially flowed overseas.

Ms. ELIZABETH WARREN (Chairman, TARP Oversight Panel): The result appears to be that America's rescue had a much greater impact on other nations than their rescue programs had on the United States.

ZARROLI: Warren points to insurance giant AIG, which had to be rescued by taxpayers. The rescue enabled the company to make good on derivatives contracts held by European banks.

Warren doesn't find fault with this. She says AIG probably wouldn't have survived as a company if it had tried to treat its overseas customers any differently than those in the U.S. And she says this cross-border flow of rescue funds is probably inevitable in an age of giant multinational banks.

Still, she says, the U.S. needs to do a better job tracking where its rescue money goes.

Ms. WARREN: If the U.S. had gathered more information about the flow of rescue funds, it could have asked other countries to share the pain.

ZARROLI: Treasury Department officials responded by saying the TARP program was part of a globally coordinated effort that had helped stabilize the financial sector during a difficult emergency, and they said trying to determine how to apportion responsibility and make everyone share the pain would have been practically and politically impossible. They also pointed out that the bank rescue would probably end up making money for U.S. taxpayers.

Jim Zarroli, NPR News, New York.

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