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House Speaker Nancy Pelosi sounded more disappointed in the findings than GAO did. "The GAO's discouraging report makes clear that the Treasury Department's implementation of the TARP is insufficiently transparent and is not accountable to American taxpayers," the California Democrat said in a prepared statement. "As part of its flagship program to invest directly in financial institutions, the Treasury Department failed to impose conditions on the use of government funds, which were intended to help ease the credit crunch, undermining the intent of the Emergency Economic Stabilization Act and public confidence."
She went on to criticize Treasury for not sufficiently pursuing foreclosure mitigation. "Congress also remains concerned that the administration has failed to implement a foreclosure mitigation plan to help millions of families stay in their homes as required under the financial rescue legislation. Preventing foreclosures will slow the nationwide drop in home values, protect neighborhoods, and is essential to address the root cause of our economic crisis." GAO tempered its critique by acknowledging that TARP has existed for less than 60 days. "A new program of such magnitude faces many challenges, especially in this current uncertain economic climate," GAO said. GAO must continue reporting on TARP's performance every 60 days. In its response, Treasury generally agreed with GAO's recommendations, but had a "different perspective" on how to evaluate ways recipients of CPP funds are using the money. Rather than working with bank regulators, as GAO urged, to establish a systematic means for determining whether financial institutions' uses of CPP funds were consistent with the stated purposes of the program, Treasury said it is opting instead to develop "general metrics" for evaluating the overall success of CPP. GAO's specific recommendations to Treasury include:
GAO's recommendations come a day after the head of a new congressional panel set up to monitor TARP complained the Treasury does not seem to have a coherent strategy for tackling the crisis. In an interview published in the Monday New York Times, Elizabeth Warren, the chairwoman of the panel, said, "You can't just say, 'Credit isn't moving through the system.' You have to ask why." If banks do not have money to lend, she told the Times, it makes sense to continue giving them capital, but if customers are simply getting less creditworthy because of the economy, "pouring money into banks isn't going to fix that problem." Warren is a Harvard University law school professor and a consumer bankruptcy expert. Besides Warren, the other Democratic-appointed members are Damon Silvers, an associate general counsel of the AFL-CIO and the panel's new deputy chairman, and Richard H. Neiman, the state superintendent of banks for New York. Republican members are Rep. Jeb Hensarling of Texas and Sen. Judd Gregg of New Hampshire. Warren said the panel will present Congress with its first report Dec. 10, "laying out the central questions that Treasury should be addressing as it spends the taxpayers' money." The panel must also present Congress recommendations for reforming the financial regulation, which she said would be delivered by Jan. 20. Aside from GAO and Warren's panel, TARP will be overseen by a special inspector general. Senate confirmation of President Bush's nominee, federal prosecutor Neil Barofsky, a federal prosecutor, is being blocked by a Republican lawmaker whose identity is being withheld under Senate rules. - Bill McConnell See a summary of the GAO report (pdf) Categories Deal Video
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The Government Accountability Office, the watchdog arm of Congress, says Treasury should better measure how banks are using capital investments from the federal government. GAO on Tuesday issued several recommendations to better insure the "integrity, accountability, and transparency" of the $700 billion Troubled Asset Relief Program. In a report submitted to Congress, GAO said Treasury has yet to address a number of issues critical to the new program, which was signed into law Oct 3. Those issues needing address include determining how Treasury will ensure that the capital purchase program, or CPP, for commercial banks is "achieving its intended goals and monitoring compliance with limitations on executive compensation and dividend payments." GAO said Treasury also needs to formalize transition planning and to establish an effective management structure and internal control system.
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