WASHINGTON (MarketWatch) -- A key Congressional watchdog group offered a mixed review Friday for the trillions of dollars in government guarantees provided as part of the financial-crisis bank bailout program.

"The enormous scale of these guarantees played a significant role in calming the financial markets last year," wrote the Congressional Oversight Panel, which is charged with monitoring the Troubled Asset Relief Program, or TARP.

However, the panel also said that the guarantees came with no upfront price tag for taxpayers.

"It was possible that, if the guaranteed assets had radically declined in value, taxpayers could have suffered enormous losses," it said.

In addition to purchasing assets and buying large stakes in financial companies, the TARP gave the U.S. Treasury the authority to support the value of assets indirectly through government guarantees.

At the height of the financial crisis, the Treasury guaranteed a massive number of financial assets, including investors holdings in money-market mutual funds, debt issued by banks and other financial institutions, along with specific assets of Citigroup Inc. .

According to the report, at the height of the financial crisis, the federal government guaranteed or insured $4.3 trillion in financial assets under three guarantee programs.

That amount has decreased significantly, in large part because a program that temporarily guaranteed money-market funds has ended.

But at its peak, the program guaranteed roughly $3.2 trillion in money market funds, according to the report, entitled, "Guarantees and Contingent Payments in TARP and Other Programs."

Among the benefits of the guarantees, the COP said, were the billions in fees earned by the government. For example, the Treasury earned $3.8 billion from its Asset Guarantee Program for large banks, according to the report.

On the negative side, however, the report said that, in many cases, taxpayers ended up standing behind guarantees of high-risk assets held by potentially insolvent institutions.

It also said the guarantees may encourage riskier behavior.

"By limiting how much money investors can lose in a deal, a guarantee creates price distortion and can lead lenders to engage in riskier behavior than they otherwise would," the report said.

"The government's broader economic stabilization effort may have signaled an implicit guarantee to the marketplace: The American taxpayer would bear any price, and absorb any loss, to avert a financial meltdown," it said.

Meanwhile, the report also urged Treasury to provide greater disclosure about the rationale behind the guarantee programs, what alternatives were not chosen and whether the department believes it has met its objectives.

It also called on the Treasury to provide disclosures regarding Citigroup's asset guarantee, the largest TARP guarantee offered to date.

"These disclosures should be detailed enough to provide a clear picture of what is happening, including information on the status of the final composition of the asset pool and total asset pool losses to date, as well as what the projected losses of the pool are and how they have been calculated," it said.

Oversight panel member Rep. Jeb Hensarling, R-Texas., expressed concern about the guarantees.

"Simply because the guarantee programs do not require an immediate outlay of taxpayer sourced funds, they are by no means free from risk," he said. "Such programs, in fact, burden the taxpayers with hundreds of billions of dollars of contingent obligations that must be funded in accordance with the terms of each governmental undertaking."