A Year Later, Toxic Assets Still Out There
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.