The Treasury Department will own billions of dollars worth of financial assets when a taxpayer-financed bailout program is over and has not set clear principles for disposing them, a government watchdog agency said on Thursday.

The Congressional Oversight Panel's monthly report on the Troubled Asset Relief Program takes a critical view of Treasury's strategy for exiting the bailout, saying a scheduled October 3 termination will not really be the end at all.

After Treasury completes all of its TARP purchases, it will hold a massive pool of financial assets likely worth hundreds of billions of dollars, and the process of unwinding some of these holdings may continue for a number of years, the panel said.

It cited Treasury holdings at year-end of TARP-related assets including $58 billion of bank preferred securities, $25 billion of Citigroup common stock, $46.9 billion of American International Group preferred stock and $61 billion of shares and debt in carmakers General Motors and Chrysler.

As well, Treasury has other assets under a Public-Private Investment Program that buys toxic assets and says it will buy more assets under a small business initiative program.

The panel says that Treasury has set out three principles for deciding when to sell its holdings but says they are so vague that they are useless. The principles include keeping the financial system stable, preserving stability of financial institutions and maximizing returns on taxpayer investments.

The principles as announced are so broad that they provide Treasury with a means of justifying almost any decision, the panel said. That means that there is effectively no metric to determine whether Treasury's actions met its stated goals.

A Treasury spokeswoman responded that Treasury was taking a cautious, transparent and disciplined approach to winding down emergency programs and said taxpayers will get a profit from money that was invested in propping up banks.

Total bank investments of $245 billion in fiscal year 2009 (which ended September 30, 2009) that were initially projected to cost $76 billion are now projected to bring a profit, Treasury spokeswoman Meg Reilly said.

Another longer-term concern the panel cited was Treasury's failure to address how to deal with the troublesome issue of implicit guarantees, popularly referred to as a perception that some firms are too big for the government to let fail and so can operate recklessly because they are always bailed out.

So long as markets continue to believe that an implicit guarantee exists, moral hazard will continue to distort prices and endanger the nation's economy, even after the last TARP program has been closed and the last TARP program has been repaid, the panel said.

It recommends that Treasury spell out more clearly how it intends to sell or dispose of assets that it has acquired while helping bail out troubled banks and other institutions.

Treasury should publicly explain its objectives so the American people can measure its success, the panel said, noting that the current lack of clarity breeds uncertainty and instability in the financial markets and provides a disservice to taxpayers as well as investors.

(Reporting by Glenn Somerville; Editing Bernard Orr)