Bailout cop: Economy still on government life support

NEW YORK (CNNMoney.com) -- The $700 billion Wall Street bailout may be winding down, but that doesn't mean the government's support for big banks and the economy at large is over. In fact, the top cop on the bailout beat says it's just the opposite.

In a report released Wednesday, Neil Barofsky -- the special inspector general for the Trouble Asset Relief Program -- said all-in government support for financial institutions and the still-distressed housing market is up 23% this year, at around $3.7 trillion from $3 trillion last year.

That extra spending results mainly from initiatives by the Federal Reserve, the FDIC and other agencies to support the financial and housing sectors.

Barofsky's main focus is on TARP, which is set to expire on Oct. 3. But his term as special investigator won't end when the government stops writing those checks. Barofsky will stay on board to keep a close watch on companies as they pay back the funds.

Nearly $500 billion of TARP funds have been committed to projects or already paid out, and about $200 billion of that money has been paid back.

Difference of opinion: Barofsky reiterated 53 recommendations from his previous reports. Among other things, he said Treasury should maintain meticulous records of its negotiations with banks that took large bailouts and publicly announce its benchmark goals for President Obama's mortgage assistance program.

While Treasury has implemented a few of Barofsky's ideas, it has refrained from adopting most.

Herb Allison, assistant Treasury secretary who oversees TARP, told reporters Tuesday that while he takes Barofsky's advice into consideration, the two often differ on specific policies.

"Sometimes we disagree not about the overall objective, but how to best get there," Allison said.

$7 billion in warrants: Barofsky applauded Treasury for striking deals at or above market value when selling back stock warrants and preferred stock it had received from bailed out firms. The government's profit so far: $7 billion from warrants and preferred stock, as well as $16 billion from interest payments, dividends and other TARP income.

At the same time, Barofsky criticized Treasury for not sticking to the same protocol when negotiating these warrant deals. But Treasury said it had to deal with each firm on a case by case basis.

Obama mortgage rescue: Among Barofsky's other major gripes is Obama's Home Affordable Modification Program, which he said is still struggling to achieve its original goal of helping 3 million to 4 million homeowners avoid foreclosure.

The program has met only a fraction of that goal and has yet to put a dent in foreclosures, Barofsky said. (Read 'Many don't qualify for Obama's foreclosure prevention')

Taking down the bad guys: SIGTARP's detective unit has turned into a "sophisticated white collar investigative agency," Barofsky said in his report, while also highlighting the government's bust of a billion-dollar mortgage fraud ring last month. Through June, Barofsky's agency was pursuing 104 criminal and civil investigations.