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The government's response to the financial meltdown has made it more likely the United States will face a deeper crisis in the future, an independent watchdog at the Treasury Department warned.
The problems that led to the last crisis have not yet been addressed, and in some cases have grown worse, says Neil Barofsky, the special inspector general for the trouble asset relief program, or TARP. The quarterly report to Congress was released Sunday.
"Even if TARP saved our financial system from driving off a cliff back in 2008, absent meaningful reform, we are still driving on the same winding mountain road, but this time in a faster car,"...
Since Congress passed $700 billion financial bailout, the remaining institutions considered "too big to fail" have grown larger, Barofsky wrote.
He said the banks still have an incentive to take on high-risk investments because they know if they fail the government will save them... [As known would be the case when such bailout were being 'debated'.]
He said the key to preventing future crises is to reform Fannie Mae and Freddie Mac and re-implement rules that separated lending banks from speculating investment firms...
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