WASHINGTON, Jan 30 (Reuters) – The U.S. taxpayer-funded rescue program set up to save banks from collapse during the financial crisis makes future reckless behavior more likely, the government’s bailout watchdog said in a quarterly report.
A quarterly report to Congress on the $700 billion Troubled Asset Relief Program, or TARP, made available in draft form late on Saturday, said financial firms seen as too big to fail before 2008 have only grown larger as they feasted on subsidies from the bailout program.
“To the extent that institutions were previously incentivized to take reckless risks through a ‘heads I win, tails the government will bail me out’ mentality, the market is more convinced than ever that the government will step in as necessary to save systemically significant institutions,” the report from the Office of the Special Inspector General for the Troubled Asset Relief Program, said.
The office, headed by Neil Barofsky, acts as a watchdog for taxpayers over how TARP money the Treasury Department administers is used.
The report said little has been achieved in terms of correcting underlying problems that helped create the financial crisis.