Treasury Needs to Better Explain TARP Plan, GAO Report Says

Jan. 30 (Bloomberg) -- The U.S. Treasury must do more to explain its strategy for the $700 billion bailout of financial markets, a congressional watchdog said.

The Government Accountability Office, in a report released today, also called on the department to tighten its oversight of how banks use the taxpayer money. The audit found that the Treasury had spent $293.7 billion from the Troubled Asset Relief Program as of Jan. 23, with most of the funds going to buy stakes in 317 lenders.

President Barack Obama and his newly installed Treasury chief Timothy Geithner have pledged to overhaul the relief effort after criticism that the Bush administration kept switching tactics to combat the crisis. Treasury Secretary Henry Paulson was running the department during most of the time covered by the report.

“The lack of a clearly articulated vision has complicated Treasury’s ability to effectively communicate to Congress, the financial markets and the public on the benefits of TARP,” the GAO said.

The report, the second of a series required by Congress, echoed criticism raised in the first GAO review in December. The audit also praised the department for taking “a step toward greater transparency” by requiring banks that get taxpayer funds to report monthly on their lending.

In a written response to the GAO, Neel Kashkari, the director of the Treasury’s bailout office, said the report “tells us we are on the right path” and that more work would be done to address the GAO’s concerns.

To contact the reporter on this story: Robert Schmidt in Washington at rschmidt5@bloomberg.net.

To contact the editor responsible for this story: Chris Anstey at canstey@bloomberg.net