US bailouts failed to tackle reckless banks, says watchdog

[CHIMO]

Washington's efforts to fix America's financial system have created a "heads I win, tails the government bails me out" mentality on Wall Street, according to a stinging report from the watchdog in charge of monitoring the government's bank rescues.

As President Obama prepares to unveil his Budget tomorrow, amid growing voter anger about the costs of the crash, Neil Barofsky, the Special Inspector General for the Troubled Asset Relief Program, used his quarterly report to Congress to rebuke politicians for failing to tackle deep-seated problems in America's financial system.

TARP was first announced by the then Treasury secretary Hank Paulson in autumn 2008, to stabilise the banking sector in the wake of Lehman Brothers' collapse. The Obama administration increased the size of the programme to $700bn and widened its scope from propping up failing banks, to boosting borrowing to small businesses and preventing mass foreclosures in the housing market.

In his report, Barofsky warns that while many of Wall Street's largest players bought their way out of the TARP last year, returning some of the government's funds, the financial system is no safer than at the height of the credit crunch.

http://www.guardian.co.uk/business/2010/jan/31/us-banking-industry-tarp