Watchdog Report: $700B Bailout Working

However, Government's Rescue of Economy has Sparked Anger and Confusion Among Americans

(CBS/ AP) A government watchdog said the $700 billion bailout for the financial industry played a major role in rescuing the economy over the last year but also engendered anger and distrust among Americans because of secrecy and confusion about the way the program was handled.

The mixed and blunt assessment by Neil Barofsky, the special inspector general in charge of oversight for the bailout fund, comes just as the administration is taking steps to wind down and refocus the Wall Street rescue effort. Barofsky's conclusions are in a quarterly report scheduled for release Wednesday.

Most alarming, Barofsky said Americans may never see any profit from the auto companies or AIG, two major beneficiaries of bailout money, CBS News White House correspondent Chip Reid reports.

Asked to give TARP a grade, Barofsky told CBS' "The Early Show" his would be an "incomplete." As for whether taxpayers can expect to see all the bailout money repaid, Barofsky was equally blunt: "unrealistic."

An administration official said Tuesday that the bailout effort's signature initiative - a capital purchase program that aimed to inject $218 billion into banks - would effectively wrap up at the end of the year.

But even as the administration aimed to refocus the massive Troubled Asset Relief Program on small businesses and homeowners, Barofsky said the effort to save the nation's financial sector cam at great cost to taxpayers, to the integrity of the financial system and to the public's perception of the federal government.

"Despite the aspects of TARP that could reasonably be viewed as a substantial success," he wrote, "Treasury's actions in this regard have contributed to damage the credibility of the program and of the government itself, and the anger, cynicism and distrust created must be chalked up as one of the substantial, albeit unnecessary, costs of TARP."

Barofsky said public suspicion was fed by Treasury's decision not to require banks to report how they used their rescue money and its "less-than-accurate" statements describing the financial condition of nine large banks that benefited from large infusions of aid. The TARP program began under the administration of President George W. Bush and has expanded under President Barack Obama.

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