The Special Inspector General for TARP has released its latest quarterly report. While these reports contain nice overviews of the TARP programs, this latest report contains a discussion of the possible pernicious effects of bank bailout on future incentives. These reports do not provide new estimates of the costs of TARP (or value of TARP holdings), nor are there quantitative analyses of moral hazard. But these reports raise a lot of good questions that we ought to look to answer. The report also emphasizes the need for reform:
The substantial costs of TARP — in money, moral hazard effects on the market, and Government credibility — will have been for naught if we do nothing to correct the fundamental problems in our financial system and end up in a similar or even greater crisis in two, or five, or ten years’ time.
It is hard to see how any of the fundamental problems in the system have been addressed to date.