An oversight panel for the government’s Wall Street bailout cited risks to the public trust over the handling of the program, as the special inspector general for the Troubled Asset Relief Program released a quarterly report Monday.

The special inspector general was created to monitor the activities of the Treasury Department involving the program started two years ago to save Wall Street from the financial crisis.

“It is undoubtedly good news that recent loss estimates continue to suggest that the financial costs of TARP may be far lower than earlier anticipated, with the most recent estimates placing the dollar loss at between $51 billion and $66 billion,” the report said.

But the report also said many Americans mistrust TARP.

“Recent actions this past quarter unfortunately suggest that the risks it poses to the public’s trust in government will continue,” the report said.

The report cited the Treasury’s Department sharp narrowing of a loss on its American International Group Inc. investment.  “While AIG’s fortunes may have indeed improved during the course of those six months, there is serious question over how much of this decrease comes from a change in Treasury’s methodology for calculating the loss as opposed to AIG’s improved prospects,” the report said.

Sen. Charles Grassley (R, Iowa) helped ensure the program had an independent inspector general. He said the report “exposes a rosy scenario.”

“It raises the question of whether administration officials are trying so hard to put a positive spin on program losses that they played fast and loose with the numbers,” Grassley said. “You can’t change the way you calculate losses to come up with a rosy scenario in October and then go back to the real numbers in November without seriously damaging your credibility with the American people.”

But Jim Millstein, chief restructuring officer at the Treasury, said in a conference call he didn’t believe there was a lack of transparency by the Treasury.