TARP Special Inspector General Neil Barofsky (pictured) all but called Treasury Secretary Tim Geithner a liar in his latest quarterly report to Congress.

In the Tuesday report, Barofsky criticizes Treasury for sins both old and new, all of which Barofsky says obfuscate the purpose and performance of the Troubled Asset Relief Program. The result of the never-ending deceit, Barofsky says, has been to provoke a severe backlash against Washington, even though the program has largely succeeded in its primary goal of helping prevent a collapse of the financial system.

Barofsky again takes Treasury to task for some already well-documented sins regarding the $700 billion program -- namely for initially telling Americans that funds from the $700 billion program would be invested only in healthy institutions and for failing to make recipients explain how they used funds from the program.

He also dumps on Treasury for two new alleged transgressions. One is changing the methodology for valuing TARP's investment in American International Group Inc. (NYSE:AIG). Barofsky says the changes allowed Treasury to restate a projected $5 billion loss on the AIG investment as a predicted $17 billion profit. Barofsky doubts that accounting changes would pass muster with auditors who must clear TARP's formal financial statement to be released later in November.

He also claims that Treasury is putting a wildly positive spin on the mortgage modification program partially funded with TARP money. Although Treasury claims that the Home Affordable Modification Program has helped 1.3 million homeowners by reducing their monthly payments, Barofsky notes that only 467,000 HAMP modifications have been permanent. The rest have been temporary modifications that may ultimately fail to keep families in their homes and may do additional harm, he says, by depleting troubled homeowners' savings, increasing outstanding principle on loans and further wrecking credit scores.

Barofsky doesn't quite say it, but he implies that the two latest obfuscations are an attempt to shore up the Obama administration's standing (and therefore Democrats' prospects) in the Nov. 2 midterm elections. For instance, on the massaging of the AIG numbers, he says, "this conduct has left Treasury vulnerable to charges that it has manipulated its methodology for calculating losses to present two different numbers depending on its audience: one designed for release in early October as part of a multifaceted publicity campaign touting the positive aspects of TARP," and the other for a post-election release "as part a larger audited financial statement."

The Obama administration defended the AIG accounting changes in its blog Thursday and accused Barofsky of ginning up "a false controversy over AIG to try and grab a few cheap headlines."

The White House said the latest valuation reflects AIG's recently announced exit strategy to pay back taxpayers, including the conversion of Treasury's illiquid AIG preferred stock stake to 1.7 billion shares of common stock. The valuation is possible now because the common shares trade on the New York Stock Exchange. "Based on current market prices, the sale of that AIG common stock would provide a substantial profit for taxpayers," the White House said. "The math isn't that complicated. It's simple multiplication."

Barofsky didn't say the new valuation was wrong, only that it compared apples and oranges and may backfire if additional TARP funds must be invested into AIG. He suggested that Treasury try to restore faith in the programs by publishing side-by-side AIG valuations using the original and the new methodology and acknowledging HAMP's failings and finally publishing "meaningful" modification goals, "no matter how modest."

His recommendations, however, miss a critical point. Treasury never intended for TARP to help Main Street, but only to have a pool of cash to shore up Wall Street. The stated additional goals of helping troubled mortgage holders and reviving small business lending were only window dressing added to sell TARP to Congress and the American people. Good luck getting Geithner to come clean on that one.