In a Sept. 22 speech, Treasury Secretary Timothy Geithner said the bailouts "are completely behind us."
That's not quite correct. In the final six months in which it could spend money from the Troubled Asset Relief Program, Treasury set aside $243 million for new contracts for law firms, accountants and money managers to help run what's left of the bailouts - on top of the $529 million already spent on work by staff, private companies and other agencies. Many of the contracts last until 2019, and there's nothing to stop the government from hiring even more help if it's needed to chase down the remaining bailout money.
Treasury's authority to spend more from the $700 billion fund expired on Oct. 3. The law requires officials to recoup as much as possible of the $185 billion still in the hands of shaky private companies. After all collections are made, the government expects to be out about $51 billion, mostly from housing programs.
Rising voter anger ahead of next week's elections has madeofficials reluctant to speak candidly about the ongoing cost of managing TARP. Politicians who voted for the TARP law now face tough re-election fights. By downplaying their efforts, officials sidestep criticism of bailouts that helped Wall Street without easing lending or keeping many people in their homes.
A government watchdog said this week that public statements by Treasury officials around the Oct. 3 deadline appeared designed to create a mistaken sense thatis over.
"The idea that TARP is dead is just not accurate," said Neil Barofsky, the special inspector general overseeing the program, in an interview. "People can write its obituary, people can declare that it's been put out of its misery, but there's still close to $180 billion of TARP money outstanding, and $82 billion obligated to be spent."
Recapturing the outstanding billions is just as tricky as the work of distributing money to stabilize a financial system rocked by its worst crisis in decades, Treasury's top bailout official said in an interview.
"When you've got $185 billion of investments out there, you don't just say, 'Gee, I'd rather not worry about it,"' Acting Assistant Secretary for Financial Stability Timothy Massad said. "This is work that anyone who looks at it would say, 'If you closed up shop now we'd be much worse off."'
Most of the contracts Treasury awarded recently are for work officials can't even describe, because it's not yet needed.
That means the contracts are vague. For example, 13 law firms will share up to $99.8 million under a contract so broad it could cover virtually any kind of legal work. Future information technology needs will be billed to three companies through a $100 million contract. Four accounting companies will ensure that Treasury's rules for the bailout programs are followed - at a cost of up to $22 million.
Much of the remaining work will involve deciding investments' values so that Treasury can resell them to the bailed-out companies or private investors. Treasury must sell shares of General Motors and Citigroup Inc. into the markets, and negotiate with banks that want to rebuy government-held stock options.
Treasury officials hope not to spend all the money authorized under the contracts. It's too early to say how much will be tapped, they say.
More than a dozen programs were created under the fund, and each requires a separate exit strategy. For example, Treasury can't sell its shares of General Motors until the company decides to offer them to private investors. The government won't approve that move until it believes investors will pay enough to give it a good return.
Meanwhile, hundreds of bailed-out banks need their government loans to stay afloat. Treasury is cutting deals with some of them, taking losses and moving on. For others, the government will wait in hopes that they grow strong enough to repay.
That will take years, at least. The program raises the fees banks must pay over time, which is supposed to encourage repayment. Yet weaker banks have stopped paying dividends. Officials say they can't force them to pay.
The recently awarded contracts suggest Treasury will continue a practice of outsourcing that was questioned in a recent report from the Congressional Oversight Panel monitoring the program. The report said that handing work to private vendors makes it impossible for the public to know that contractors are doing what they were hired to do or to ensure that they are performing well.
The panel mostly praised systems Treasury put in place to make sure contracts follow government rules, but did not investigate whether the systems are working. The special inspector general will audit them in a future report.
Treasury officials continue to cast TARP as a success. Most of the Wall Street giants that got the first bailouts have reported another quarter of profits.
Yet Treasury still has no plan for recapturing investments from the banks that can't pay dividends or repay their bailouts. That program doesn't have an end date.