Critics across a broad ideological spectrum are ramping up their attacks on the Treasury Department's $700-billion banking bailout, saying it is now doing more damage to credit markets than good.
Lending is flat, investors are fleeing bank stocks, and the huge investment by the government into troubled banks has plummeted in value by more than $100 billion, according to some recent studies.
In congressional hearings, lawmakers have repeatedly asked whether the rescue program threatens the solvency of the federal government. Obama administration officials dismiss the risk.
Defenders of the program say that despite problems, the bailout prevented a financial-system meltdown in the fall, and that Obama administration policies have not had time to have an impact.
None of the critics of the government's Troubled Asset Relief Program has offered a better alternative, said a senior Treasury Department official, who did not want to be identified because he does not speak publicly on the issue.
But critics contend that what was originally proposed as an overwhelming gesture of government resolve to get banks on their feet now seems like an intravenous drip, barely sustaining the giant institutions that account for the majority of U.S. bank assets. As time goes on, the problems appear again to be deepening.
"Some of these banks are walking dead and should be closed," said Sen. Richard C. Shelby of Alabama, a 20-year veteran of the Senate Banking Committee and its senior Republican. "We are propping up financial institutions that are insolvent and have already failed. The government has made a political decision to keep them going at the taxpayers' expense."
At the other end of the political spectrum, the AFL-CIO Executive Council voted unanimously last week to urge President Obama to nationalize problem banks as a way to stimulate and stabilize the financial system.
"Every day we delay is another day workers in this country feel the pain of a stagnant economy," said Richard L. Trumka, secretary-treasurer of the labor organization, a powerful influence on the Democratic-controlled White House and Congress.
Even some banks are furious over how they say the government has bungled describing the program to the public, allowing investments in weak banks to stigmatize healthy banks that took government funding.
