Neil Barofsky

He was appointed with fanfare in December as public watchdog over the government's multibillion-dollar bailout of the nation's financial system. But now Neil Barofsky, inspector general of the Troubled Asset Relief Program, is embroiled in a dispute with the Obama administration that delayed one recent inquiry and sparked questions about his ability to investigate without interference. The Treasury Department contends that Barofsky does not have a completely independent role.

The Treasury Department "lost credibility" when it said its first capital injections from the $700 billion financial rescue were for healthy banks, the inspector general for the Troubled Asset Relief Program said. In a report issued today, the inspector, Neil Barofsky, said then-Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke had concerns about the finances of several of the nine banks in which the government invested $125 billion last October. Two of those lenders, Bank of America Corp.

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.