An independent audit released by the bipartisan Congressional Oversight Panel (COP) has found the $700 billion Troubled Asset Relief Program (TARP) to be effective, so much so that the Department of the Treasury has extended it to October 3, 2010.  Treasury Secretary Timothy Geithner plans to use the remaining funds to assist families facing foreclosure and give loans to small businesses.

The COP was unable to fully gauge TARP’s impact because of other forces such as the $787 billion American Recovery and Reinvestment Act, tax cuts and actions by the Federal Reserve and Federal Deposit Insurance Company.  “Even so, there is broad consensus that the TARP was an important part of a broader government strategy that stabilized the U.S. financial system by renewing the flow of credit and averting a more acute crisis,” according to the report.  “Although the government’s response to the crisis was at first haphazard and uncertain, it eventually proved decisive enough to stop the panic and restore market confidence.”

That said, after 14 months of TARP, the panel admits that problems remain.  Banks are still skittish about making loans, toxic mortgage-related assets are still sullying banks’ balance sheets and smaller banks are susceptible to difficulties in the commercial real estate sector.  And, with 13 million additional home foreclosures expected over the next five years, “TARP’s foreclosure mitigation programs have not yet achieved the scope, scale and permanence necessary to address the crisis.”

Repayments from banks that received TARP dollars are expected to total $116 billion, including $45 billion that is being returned by Bank of America.  The government is likely to receive as much as $175 billion in repayments from companies it rescued by the end of 2010.