A Year Later, Toxic Assets Still Out There

(CBS)  It's been about a year since the first peak of the U.S. financial crisis, when Bear Stearns and Lehman Brothers collapsed. And it was a year ago today that the government came to the rescue of AIG.

Then came a plan to help banks, struggling under the weight of bad mortgages. It was called TARP. But, as CBS News correspondent Wyatt Andrews reports, the program has not gone as originally planned.

As Wall Street fell into a free fall last year, Treasury Secretary Henry Paulson announced an astonishing plan to remove from the market what he called "troubled assets."

He wanted taxpayers to up buy $700 billion worth of these "toxic" bad investments - shaky home mortgage securities that were tanking the banks and drying up credit.

After heated debate, Congress responded with TARP, the Troubled Asset Relief Program. But one year later, not one of those troubled or toxic assets has been purchased.

Instead, the Treasury Department spent the funds - $390 billion so far - on direct cash investments to stabilize the banks. It worked.

But the Congressional panel that oversees TARP funds recently warned that most of those troubled assets, some $657 billion worth, are still out there, and are still "a substantial danger to the financial system."

"The same dangers that they presented back then have not been erased," said Elizabeth Warren, a Harvard professor and the chair of the TARP Congressional Oversight Panel.

Read more about government efforts to buy up toxic assets.

The president also committed $75 billion in TARP funds to help working homeowners get cheaper mortgages - from the banks. But that program, Making Home Affordable, has moved slowly. The Treasury reported last week that out the 4 million homeowners thought eligible only 360,000 new loans had been made.

Olga Butler is angry that her bank, Bank of America, denied her application three times without a reason.

"I have the sense they are not trying to help," she said. "Don't say you are going to help us - don't take taxpayer money and say, 'Oh, we're doing everything we can' and then do absolutely nothing."

Bank of America tells CBS News it's helped 9,000 homeowners since the Treasury report - and is reviewing Olga Butler's application.

One year later the economy is recovering and for that the Treasury deserves credit. But not much has changed in the value of the toxic assets that so weakened the economy to begin with.

[trillion1]

Giving the crooks who caused this mess a trillion dollars with no strings attached was a huge mistake. I am against the goverment just sending out people checks but if they had done that with the money we'd probably be in alot better shape.

[Marc_1986]

Just more proof that my assumptions were correct; the TARP money was a complete WASTE and we would have gotten along just fine without it. Bush and the congressional Democrats really screwed up on this one.

[TheVarsityClub]

Elizabeth Warren is someone that actually cares about the countries future. It is of my opinion the government placed Mrs. Warren in her current position to somewhat try to control her opinions on the financial industry. Mrs. Warren has been questioning the practices of lending leaders for years. If she says theres trouble, then theres trouble. Save your money.

[jxknowles]

Some of it is garbage and needs to be fixed by local governments and neighborhood coalitions. In our city, 50% of the foreclosed properties have been vandalized and stripped of copper plumbing and wiring.

The banks are clueless on on how to unload this stuff. But, as long as they are paying back TARP money at 5% interest to the taxpayers, let them take their time.

[searingtruth]

"Our last great hope is doing the same as our last great tyrant."
SearingTruth

A Future of the Brave

[Lawyers-Guns-n-Money]

'A Year Later, Toxic Assets Still Out There'

Who in the world came up with this oxymoron?

[dovelady7]

Maybe Bank of America and other banks should take responsibility, and do the right thing, and repair these loans they promised to restructure. Instead they have only done a few loans, and spend the TARP money on advertizing for new loans, and how caring they are. Many states dropped lawsuits against Countrywide. with the agreements (judgements) that they would work with people that were scammed with their deceptive loan practices. I think more oversight and accountable should be in order. The lawyers and these illegal Mortage repair Companies that charge $2,000 claiming to save your home, are along with the banks,are the only ones making money these days. My husband and I have both survived cancer, and went through NACA (no fee + non-profit) which also has legally binding aggrements with Bank of America to restructure these loans. We qualified, and our counselor helped us submit our documents in May. He told us that "this should be a no brainer". Well, here it is over 100 days later, and our loan is still under review. Meanwhile, we contiue to make the mininum payment on a pay option loan, which is really a reverse mortgage that has added another $30,000 to our loan. We were misled into this loan, so we could pay our medical bills. We meet the requirements and only want an long term fixed affordable loan,even though the property is worth less that the loan. It is our home, where can we go. The last three payments on our loan has been "set aside" (where?) and we are now listed in default and are charged late charges for payments that were made on time. When we ask, the answer was "that is the way we have to do it, until your loan is done, then we will give it back and take it off of your credit reports". We are not the only one out here. Others all have their stories of how the banks are stringing them along, but we are not heard. Please, please, call them out.