WASHINGTON, D.C. -

Five federally appointed overseers for the expenditure of Troubled Asset Relief Program (TARP) funds reported Thursday that success of the Treasury Department’s assistance to General Motors and Chrysler is on “a promising course.”

The Congressional Oversight Panel released its January oversight report and insisted the financial state of taxpayers’ investments has improved starkly. While still significantly guarded, panel members offered detailed assessments of the new versions of General Motors and Chrysler.

“The panel finds that, although it remains too early to tell whether Treasury’s intervention in the U.S. automotive industry will prove successful, the government’s ambitious actions appear to be on a promising course,” members wrote in their report titled, “An Update on TARP Support for the Domestic Automotive Industry.”

“Even so, the companies that received automotive bailout funds continue to face uncertain futures, taxpayers remain at financial risk, concerns remain about the transparency and accountability of Treasury’s efforts, and moral hazard lingers as a long-run threat to the automotive industry and the broader economy,” members cautioned.

The panel indicated its last comprehensive report on TARP automotive programs came in September 2009. At that juncture, the group reported the Congressional Budget Office estimated that taxpayers would lose $40 billion in the automotive industry. Today, panel members discovered that the CBO has reduced its loss estimate to $19 billion.

“The three largest recipients of automotive bailout funds — General Motors, Chrysler, and GMAC/Ally Financial — all appear to be on the path to financial stability,” panel members surmised.

“In each of its automotive bailouts, Treasury’s goal of recovering taxpayer money has conflicted with its stance as a reluctant, ‘hands-off’ shareholder,” they continued.

To illustrate the point, the panel explained the Treasury sold 40 percent of its stake in GM early in the initial public offering. The panel calculated that the share price was 26 percent lower than needed to recover taxpayers’ investment in full.

With regard to Chrysler, the panel had a more sullen assessment.

“Treasury sold its position in Chrysler Financial so hastily that it may not have performed basic due diligence and may have left money on the table,” panel members speculated.

And the panel suggested the Treasury has maintained its position as a “hands-off” shareholder even at the expense of profitability in connection with GMAC/Ally Financial, as well. Members came to that assessment since the Treasury declined to urge GM to consider repurchasing GMAC/Ally Financial.

“In all of these cases, Treasury’s decisions may well have been reasonable, but they illustrate the inherent conflicts in Treasury’s stated goals for its automotive intervention,” the panel stressed.

“Virtually any action may be defended as either improving taxpayers’ returns or maintaining a ‘hands off’ approach, and as a result, it is difficult for any outside observer to judge whether Treasury’s results in fact qualify as successful,” members continued.

The panel went on to report that the Treasury is now on course to recover the majority of its automotive investments within the next few years, but the impact of its actions “will reverberate for much longer.” That belief brought members to some pundits’ assessment that GM and Chrysler were “too big to fail.”

“Treasury’s rescue suggested that any large American corporation — even if it is not a bank — may be considered ‘too big to fail’ if its collapse would eliminate enough jobs and wreak enough economic damage,” the panel assessed.

“As a result, the automotive rescue creates a risk that moral hazard will infect areas of the economy far beyond the financial system,” members fear.

“Further, the fact that the government helped absorb the consequences of GM’s and Chrysler’s failures has put more competently managed automotive companies at a disadvantage,” members went on to emphasize. “For these reasons, the effects of Treasury’s intervention will linger long after taxpayers have sold their last share of stock in the automotive industry.”

Federal officials reiterated the Congressional Oversight Panel was created to oversee the expenditure of TARP funds authorized by Congress in the Emergency Economic Stabilization Act of 2008 and to provide recommendations on regulatory reform.

Panel members are former Sen. Ted Kaufman, who also serves as chairman; attorney and certified public accountant Mark McWatters; Richard Neiman, superintendent of banks for the state of New York; Damon Silvers, policy director and special counsel for the AFL-CIO; and Kenneth Troske, a William B. Sturgill Professor of Economics at the University of Kentucky.