Troubled Asset Relief Program

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.

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.

As the watchdog of the government's massive bailout of the financial sector, Neil M. Barofsky had a simple question: What had the nation's banks done with all their bailout money? Can't be answered, said the Treasury Department, because of the way banks move money internally. The department declined to put the question to the banks.

Although the formal unveiling is still a couple of weeks away, the broad outlines of President Obama's long-delayed plan for reviving the nation's financial system are coming clear: an ambitious but untested attempt to partner up private capital with government funds while limiting the risk to taxpayers.

Wells Fargo & Co. didn't want a federal capital infusion last fall but got one anyway. Now, despite its earlier objections, the bank isn't rushing to pay the money back. Wells confirmed Tuesday that it wasn't among the 10 megabanks that have applied to repay the capital the Treasury injected under the Troubled Asset Relief Program. The San Francisco bank cited a need to concentrate on digesting loss-ridden Wachovia Corp., which Wells bought late last year.

Critics across a broad ideological spectrum are ramping up their attacks on the Treasury Department's $700-billion banking bailout, saying it is now doing more damage to credit markets than good. Lending is flat, investors are fleeing bank stocks, and the huge investment by the government into troubled banks has plummeted in value by more than $100 billion, according to some recent studies.

The chief watchdog for the U.S. Treasury's $700-billion bailout will ask bank executives not only to describe how they are using the funds but also to certify their answers under threat of criminal penalties, he said in an interview Wednesday. Neil J. Barofsky, special inspector general for the Troubled Asset Relief Program, said his intent was to shed more light on the workings of the widely criticized program.

Amid growing public consternation with the federal banking bailout, the Treasury Department's special inspector general has opened an examination of political influence in handing out some of the $350 billion in federal bank bailout funds, The Times has learned. The audit, which has just begun, is broad in scope but will focus on lobbying activities by financial institutions and what the special inspector general, Neil Barofsky, has called "outside influences."

The nation's major banks modestly reduced their overall lending in recent months, even while they were collecting nearly $200 billion in federal bailout funds, the Treasury Department said Tuesday in its first progress report on the banking rescue program.

For weeks, President Obama has been pushing hard on his plan to revive the nation's economy, driving the $787-billion stimulus package through Congress, following up with a plan for homeowners facing foreclosure and readying a strategy for reviving the moribund credit system.