Time to Explain Citi, Bank of America Bailout: Today's Outrage

Singling out Citigroup and Bank of America, the Congressional Oversight Panel says the government owes taxpayers some explanations about the bailout.
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NEW YORK (

TheStreet

) --American taxpayers are lucky that the government's bank bailout didn't destroy the financial system.

That pretty much sums up the Congressional Oversight Panel's

review of the bailout

, released today.

The panel's report is peppered with phrases like "moral hazard", "considerable risk to taxpayers", and "price distortion."

The report takes a slightly indigant tone at times and demands that the Obama administration start justifying its actions.

Singling out

Citigroup

(C) - Get Report

and

Bank of America

(BAC) - Get Report

, which received hundreds of billions of dollars in asset guarantees, the panel said the Treasury needs to provide an analysis of why those two banks were selected for the asset guarantee program and not others.

Citi and Bank of America, along with

AIG

(AIG) - Get Report

,

Chrysler

,

GM

and

GMAC

, represent parts of the bailout that are likely to be "enduring and costly to taxpayers," the report said.

Considering the amount of risk placed on taxpayers, the American public deserves more transparency about the choices made by government officials and whether they achieved their objectives, the panel said. In other words, let's see a little government accountability!

"The American taxpayer stood behind guarantees of high-risk assets held by potentially insolvent institutions," according to the executive summary of the report. "It was possible that, if the guaranteed assets had radically declined in value, taxpayers could have suffered enormous losses."

Most damning of all is the panel's conclusion that the implied guarantee backed by the full faith and credit of the United States "can lead lenders to engage in riskier behavior than they otherwise would."

Talk about the law of unintended consequences.

The panel did note the increasingly aggressive efforts of the Treasury to safeguard taxpayer money (better late than never) and said it found no significant flaws in the handling of the bailout. It also concluded that the guarantees helped calm the financial markets and encouraged lenders to continue making credit available.

Among the few bright spots, the report cited the success of repayments by

Goldman Sachs

(GS) - Get Report

and

JPMorgan Chase

(JPM) - Get Report

that helped provide a 17% annualized rate of return on the Capital Purchase Program, according to the report. More cynical folk may think those two banks were included in the original bailout just so the government could have a few quick wins.

Ultimately, there is an implied sigh of relief in the Congressional Oversight Panel's report.

Despite the fact that taxpayers were on the hook for a whopping $4.5 trillion in guaranteed or insured financial assets at the peak, the government is likely to receive more revenue in fees than it pays out in guarantees, the report said.

Sounds like a good time to start looking for the exit.

--Written by Glenn Hall in New York.

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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.