TARP Watchdog Softens Bite
On Monday, the White House announced 10 banks who received federal aid would be allowed to repay $68 billion to taxpayers.
Also Monday, Warren, the Harvard University professor who chairs the oversight panel, criticized the government-administered "stress tests" for not presenting the worst-case scenarios they were supposed to, particularly in regard to projected unemployment.
She repeated those concerns Tuesday on CBS' The Early Show, but said that despite those shortcomings, "we're starting to get some honesty into the system."
"We like the stress tests and the idea behind the stress tests and think the basic model of the stress tests is right."
Instead, most of her criticism was directed at former Treasury Secretary Henry Paulson.
"Last October and November, Secretary Paulson put $350 billion into the financial institutions. And he told us at the time he was doing it, 'They are all healthy banks.' … In fact, the banks were not healthy," Warren told The Early Show co-anchor Harry Smith. "When they weren't healthy, when we infused this money and stuffed this money into them, they just held on to it."
"Now what we're getting in many ways is a much more realistic assessment. … In effect, they're starting through the process of sorting the wheat from the chaff."
Warren said she was concerned about the test's projected worst-case average annual unemployment rate of 8.9 percent for 2009. Joblessness hit 9.4 percent last month.
She also said that the length of time covered in the tests stops at the end of 2010, even though many commercial mortgages are coming due the three years after that end date. Those could present further turbulence for the financial system.