The Congressional Oversight Panel, in a report released Friday, said last year's overpayments amounted to a taxpayer-financed $78 billion subsidy of the firms.
The findings added to the frustrations of lawmakers already wary of the $700 billion rescue plan, known as the Troubled Asset Relief Program. Congress approved the plan last fall, but members of both parties criticized spending decisions by the Bush administration and former Treasury Secretary Henry Paulson.
Financially ailing insurance giant American International Group, which the Treasury Department deemed to be too big to be allowed to fail, received $40 billion from the Treasury for assets valued at $14.8 billion, the oversight panel found.
"Now there could be lots of policy reasons that Treasury might decide that it wanted this money to be in the banks," panel chairwoman Elizabeth Warren said Friday morning on CBS. "But our question is the one we put to Secretary Paulson, and that is, 'Are you putting it in and getting back assets that are worth equivalent value?' He told us yes; our independent investigation said no."
The misgivings come as new Treasury Secretary Timothy Geithner is preparing to place the Obama administration's imprint on the program with a sweeping new framework for helping banks, loosening credit and helping reduce foreclosures. Geithner plans to unveil the changes Monday.