Taxpayers have done well with federal guarantee programs to fight the recession, despite the fact that the programs are "a very dangerous tool," Congressional Oversight Panel Chairman Elizabeth Warren said Friday.
"American taxpayers took on the kinds of risk the financial system can no longer bear," Warren said.
Only $2m of losses came from a peak of $4.3trn in asset guarantees by the Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corporation, which generated $17.4bn in fees for the federal government. The biggest cost to the economy has been a high distortion of the market, Warren said.
While Treasury has disbanded its $3.22trn temporary guarantee program for money market funds, Warren said there is now an implicit guarantee of the popular financial product. With the guarantee comes the risk that money managers will feel free to take excessive risks, she warned.
Warren spoke after COP released a study reporting no significant flaws in the Treasury's
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