Yesterday, the Congressional Oversight Panel (COP) released its second monthly report on the expenditure of Troubled Asset Relief Program (TARP) funds authorized by Congress in the Emergency Economic Stabilization Act of 2008 (EESA). The report documents the efforts to get answers to the questions posed in the Panel’s first report, and details both the answers received from Treasury, and the many questions that remain un-addressed or un-answered.
“Hullo Houston, we’ve got a problem.”
As was noted in the report, “[b]ecause the questions we asked one month ago are important as ever, in this second report we lay out exactly what questions have been answered, what haven’t been answered and why these questions are important,” said Elizabeth Warren, the Chair of the Oversight Panel. “The American people have a right to know how their taxpayer dollars are being used, and so far, they have not gotten the transparency and accountability they deserve.”
Apparently the Treasury Department does not see this as a problem.
TARP and the Congressional Oversight Panel
On October 3, 2008, Congress provided the U.S. Treasury with the authority to spend $700 billion to stabilize the U.S. economy. Congress created the Office of Financial Stabilization (OFS) within Treasury to implement a Troubled Asset Relief Program (TARP). At the same time, Congress created a Congressional Oversight Panel (COP) to “review the current state of financial markets and the regulatory system.”
COP is empowered to hold hearings, review official data, and write reports on actions taken by Treasury and financial institutions and their effect on the economy. Through their reports to Congress and American taxpayers, the COP is mandated to:
- Oversee Treasury’s actions
- Assess the impact of spending to stabilize the economy
- Evaluate market transparency,
- Ensure effective foreclosure mitigation efforts
- And guarantee that Treasury’s actions are in the best interest of the American people.
Lastly, Congress has instructed COP to produce a special report on regulatory reform that will analyze “the current state of the regulatory system and its effectiveness at overseeing the participants in the financial system and protecting consumers.”
So far, so good.
The Panel’s Second Report
However, in today’s report we now find that the Treasury Department is choosing to ignore the Panel’s queries into how it is managing the distribution of more than $700 billion in taxpayer money. I won’t go into great detail about all of the questions that the Treasury Department has so far failed to answer. However, it’s worth noting some of the more critical questions that we all want an answer to but have received no response from Treasury. As the report notes:
The Panel still does not know what the banks are doing with taxpayer money. Treasury places substantial emphasis in its December 30 letter on the importance of restoring confidence in the marketplace. So long as investors and customers are uncertain about how taxpayer funds are being used, they question both the health and the sound management of all financial institutions. The recent refusal of certain private financial institutions to provide any accounting of how they are using taxpayer money undermines public confidence.
For Treasury to advance funds to these institutions without requiring more transparency further erodes the very confidence Treasury seeks to restore. Finally, the recent loans extended by Treasury to the auto industry, with their detailed conditions affecting every aspect of the management of those businesses, highlights the absence of any such conditions in the vast majority of TARP transactions. EESA does not require recipients of TARP funds to make reports on the use of funds. However, it is within Treasury’s authority to make such reports a condition of receiving funding, to establish benchmarks for TARP recipient conduct, or to have formal procedures for voluntary reporting by TARP recipient institutions or formal guidelines on the use of funds. The adoption of any one of these options would further the purposes of helping build and restore the confidence of taxpayers, investors, and policy makers.
On a practical level, where did the $100 billion or so given to AIG and its creditors go? So far, the Treasury Department isn’t saying. What is Treasury’s vision of the problem? So far, no word. What does Treasury think the central causes of the financial crisis are and how does its overall strategy for using its authority and taxpayer funds address those causes? Mums the word. Is Treasury seeking to use TARP money to shape the future of the American financial system, and if so, how? Apparently, this is none of our taxpaying business.
The full report can be found here. Be forewarned, this report is not for the faint of heart.
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