WASHINGTON — The Treasury is unlikely to get back the full amount of money lent under the Troubled Asset Relief Program despite a recent spate of repayments from large banks, warned the program's watchdog.
The program "played a significant role" in rescuing the financial system from a meltdown, Neil Barofsky, special inspector general for TARP, testified before the Senate Banking Committee on Thursday. But it was "extremely unlikely that the taxpayer will see a full return on its TARP investment," according to his prepared testimony.
Losing some money was almost inevitable, said William Goetzmann, a finance professor at the Yale School of Management.
"The intent of TARP investment was not that it was a great investment for the U.S. taxpayer," Goetzmann said. "The intent was to save the U.S. financial system, and that was going to cost some money."
He said he expected to see differences in repayment emerge among banks of different sizes. Larger banks such as Goldman Sachs, which returned $10 billion in TARP money in July, are all likely to pay back the money fairly soon, but Goetzmann warned that many smaller banks may end up defaulting on their obligations.