Bank Bailout Revealed As Biggest PR Campaign of All Time: Today's Outrage

The unprecedented $1 trillion taxpayer bailout of the financial sector accomplished pretty much nothing in terms of cleaning up the toxic asset wasteland that caused the credit crisis.
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NEW YORK (

TheStreet

) -- The unprecedented $1 trillion taxpayer bailout of the financial sector accomplished pretty much nothing in terms of cleaning up the toxic asset wasteland that caused the credit crisis.

That's right. All that bad debt remains in pretty much the same sorry state it was in before the bailout, according to a

report by the Congressional Oversight Panel.

The report bluntly states that "troubled assets remain a substantial danger to the financial system ," but the best route of protection remains unclear.

Just about all we got was a de facto government guarantee that it wouldn't let the biggest banks fail. Smaller banks have been left to rot or resort to mergers in order to gain enough heft to get noticed.

According to the oversight panel's report, the government has essentially promised to protect

Bank of America

(BAC) - Get Report

,

JPMorgan

(JPM) - Get Report

,

Wells Fargo

(WFC) - Get Report

,

Citigroup

(C) - Get Report

and other megabanks, but offered no promises for regional banks such as

KeyCorp

(KEY) - Get Report

,

SunTrust

(STI) - Get Report

or even

Capital One

(COF) - Get Report

and

Fifth Third

(FITB) - Get Report

.

Yet, the smaller banks are at even greater risk because they have more exposure to commercial real estate and less access to fresh capital to cover loan losses, according to the report.

Once again, the actual outcome of government policy seems blatantly contradictory to the Obama Administration's stated goal of reducing the number of banks considered too big to fail and thereby diminishing the risks such banks pose to the economy.

Instead, the government is propping up the biggest banks, showering them with special favors and encouraging smaller banks to get bigger if they want to join the party.

Meanwhile, investors are being duped into believing the toxic asset mess is being cleaned up because relaxed accounting rules have made the problem appear less foreboding.

Truth is, we don't really know very much about these bad debts and troubled assets - in fact the lack of disclosure requirements is among the issues raised by the Congressional Oversight Panel.

I'm not saying the bailout was a failure, mind you. There is no doubt in my mind that the government's intervention helped prevent a total collapse of our financial system and may have helped avert a major depression.

The government - both the Bush Administration and the Obama Administration - recognized that perception is reality and took the necessary steps to shore up the psyche of the nation.

That makes this massive government bailout the most expensive and lavish public relations campaign of all time.

And that's all it will be until something is actually done about the toxins in the financial environment.

It's time to start the actual cleanup -- and who knows how much more that will cost.

--Written by Glenn Hall in New York.

Glenn Hall is the New York-based Editor in Chief of

TheStreet.com

. Previously, he served as deputy editor and chief innovation officer at

The Orange County Register

and as a news manager at

Bloomberg News

in Frankfurt, Amsterdam and Washington, D.C. As a reporter, he covered business and financial markets, worked in both print and television in the U.S. and Europe, and conducted in-depth investigative coverage at

The Journal-Gazette

in Fort Wayne, Ind. His work also has been published in a variety of newspapers including

The Wall Street Journal

,

The New York Times

and

International Herald Tribune

. Hall received a bachelor's degree in journalism and political science from The Ohio State University and a certificate in project and program management from Boston University.