Watchdog: TARP Profit Is 'Misconception' Hundreds of small banks struggling to repay loans By John Johnson, Newser Staff Posted Apr 25, 2012 1:05 PM CDT 5 comments Comments More than 300 small banks in the US are struggling to repay their TARP loans, says a watchdog. (Shutterstock) (Newser) – The Treasury Department tends to give glowing reviews to the TARP bailout, but the program's inspector general has a distinctly different view. "It is a widely held misconception that TARP will make a profit," writes Christy Romero in a new report to Congress, according to the Huffington Post. She notes in particular that 351 smaller banks that got loans are struggling to repay them, reports the Wall Street Journal. "The status of those banks is one of the major issues facing TARP nearly four years after the financial crisis," says her report. What's more, Romero warns that the question of whether TARP even makes a profit is narrow-minded. TARP may indeed "have prevented the immediate collapse of our financial and auto-manufacturing industries," but "the trade-off is not without profound long-term consequences. A significant legacy of TARP is increased moral hazard and potentially disastrous consequences associated with institutions deemed 'too big to fail.'" Reform is still needed, and the nation can't let its guard down because of its improved financial picture, warns Romero.