NEW YORK (CNNMoney.com) -- The watchdog charged with monitoring the government's $700 billion bailout unleashed one of his harshest criticisms of the program to date, questioning its overall effectiveness.
In his latest quarterly report to Congress, special inspector general Neil Barofsky said that the Troubled Asset Relief Program, or TARP, has failed to boost bank lending as well as halt the spread of foreclosures -- two key aims of the sprawling program.
"Whether these goals can effectively be met through existing TARP programs is very much an open question at this time," Barofsky said in the report.
When Congress enacted TARP, the hope was that injecting capital into hundreds of banks would spur lending and keep the economy from spiraling even deeper into recession.
But since then, lending to both consumers and businesses has continued to decline.
Earlier this month, the Treasury Department reported that the 22 banks that got the most aid from the government's various bailout programs have cut their small business loan balances by $12.5 billion since April.
The Obama administration did propose a joint program between the Treasury Department and the Small Business Administration in October to make capital cheaper for community banks that commit to increasing their small business lending.
Three months later however, the government is still drafting guidelines for that initiative.
Barofsky, whose office has been closely tracking the evolution of TARP, also criticized the Obama administration's Home Affordable Modification Program.
Even as Treasury allocated $35.5 billion towards that foreclosure-prevention program as of the end of last year, only 66,500 homeowners have received permanent modifications, with another 787,200 homeowners in trial modifications.
Under fire for the low number of people receiving long-term help, the Treasury Department in late November ramped up pressure on servicers to convert borrowers to permanent modifications.
Still, there is no sign that the rate of foreclosures is slowing down anytime soon. Earlier this month, RealtyTrac, the online marketer of foreclosed homes, reported that foreclosure filings surged to a record 3 million in 2009, up 21% from 2008.
There was at least one bit of good news from Barofsky's latest report however. He acknowledged that while the ultimate cost will still be "substantial" for American taxpayers, it will be less than originally estimated.
In December, the White House echoed those sentiments after it lowered its projections for the ultimate cost of TARP from $341 billion to $141 billion, as banks have raced to repay government aid. Embattled lenders Citigroup (C, Fortune 500) and Bank of America (BAC, Fortune 500) returned a combined $65 billion to government coffers in December.
However, the American public is still expected to incur a massive loss in the end -- the question is just how much it will be. A separate estimate issued earlier this year by the Congressional Budget Office warned that TARP will ultimately cost taxpayers approximately $159 billion.
This month, Delaware became the first state to pass a law giving heirs the right to access the online accounts and assets of someone who has passed away. More
Median income is up 3.8% since 2011, though it's still down since the economic recovery began in 2009. More
Intellectual Ventures, a patent troll company, has laid off 19% of its staff. More
Small business owners say the economy is still their biggest challenge, which keeps them from expanding and hiring, according to a CNNMoney-Manta survey. More