The Troubled Asset Relief Program wasn’t really a bank bailout after all, but instead was the “most successful government financial program ever,” banking analyst Dick Bove said.

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In a research note, Bove noted that the controversial TARP saved the banking industry as well as the broader economy while generating a hefty return for taxpayers.

Former President George W. Bush signed the $700 billion program into law on Oct. 3, 2008 as banks suffered a liquidity crisis brought on by the collapse of the subprime mortgage market. TARP recapitalized banks across the board—even many that didn’t need the extra money.

Bove praised the program for restoring faith in the system even though it has received a largely negative public perception.

“In short this may have been the most successful United States program ever,” he wrote. “Moreover, it was bipartisan in the sense that both the Republican Administration that created it and the Democratic Administration that fostered it were unified in their beliefs as to what should have been done—and they did it.”

More than half the TARP banks have repaid the money and the Treasury Department has netted a $28 billion profit so far. The Federal Deposit Insurance Corp also has brought in $12 billion on its guarantee program while the Federal Reserve “may have made” an additional $20 billion, Bove said.

Yet perception of the program remains largely negative, a fact Bove bemoans and blames largely on the media and politicians.

“They continue to excoriate the program as having been harmful to ‘main street’ America,” he wrote. “The program was never understood by … either group and they acted on their misperceptions by selling the American people an enormous set of falsehoods concerning what was being done and the effect of these programs.”

Bove’s analysis, though, does not address what is perhaps the biggest criticism of TARP – the concept of “moral hazard,” or whether the government’s assistance in the crisis sent a message that recklessness by banks will always get a governmental backstop.

He also states that TARP “reversed a decline in the economy which would have resulted in even more bankruptcies, lost jobs and wealth destruction.”

Yet 2010 has seen the greatest number of bank failures (143) than any year since the financial crisis began, and unemployment was at 6.6 percent the month TARP was introduced and has soared to 9.6 percent since, with a top rate of 10.1 percent in between.

But Bove said the damage to the economy could have been even worse.

“The sale of these misperceptions has impacted Congressional legislation; created stress on the economy that was not needed; and lowered prices in the financial sector,” he wrote. “Maybe the time has come for the sellers of the falsehoods to redress what they have done and explain what the TARP program has done for Americans.”

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