Government Report Questions Rescue Claims

WASHINGTON (AP) -- A new report contends the credibility of the government's $700 billion financial rescue program was damaged by claims a year ago that all of the initial banks receiving support were healthy.

Special Inspector General Neil Barofsky generally finds the government acted properly in October 2008 as it scrambled to implement the Troubled Asset Relief Program to avert the collapse of the U.S. financial system.

But the report says then-Treasury Secretary Henry Paulson and other officials were wrong to contend at an Oct. 14 press conference that all nine institutions receiving the first round of support were sound.

Barofsky says the fact that some institutions soon required billions in additional assistance highlighted the inaccuracy of that claim and raised questions about the whole effort.

Commenting on Barofsky's report, the Federal Reserve generally supports the findings.

But Assistant Treasury Secretary Herbert Allison Jr. says any critique should take into consideration the unprecedented circumstances facing financial regulators at the time.

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