Treasury Under Fire for Handling of TARP

Lawmakers Say Treasury Department Has Not Resolved Problems With TARP's Accountability and Transparency

By Matthew Jaffe

March 31, 2009

Six months after the Troubled Asset Relief Program was signed into law, lawmakers and oversight officials, worried about the trillions of taxpayer dollars at stake, said Tuesday that the Treasury Department had not resolved problems regarding the program's accountability and transparency, nor a communications strategy.

One watchdog group said flatly that Treasury had not cooperated with oversight efforts up to this point.

"Our concern right now is that we do not seem to be a priority for the Treasury Department," Elizabeth Warren chairwoman of the Congressional Oversight Panel told a Senate Finance Committee hearing today. "We have sent letters. We have requested that there be someone named so that we can get technical information. And so far, we have not been a first priority."

"As I see it, you really have two options here," Warren said. "Either you get Treasury to get some religion on this point -- and put their own standards in place, or Congress is forced to step in. We will do everything we can on your behalf, as your congressional oversight panel, but what we can best do for you now is to identify and pinpoint that this is precisely where the problem starts."

Neil Barofsky, special inspector general for TARP, voiced similar concerns. He noted that his office had recently conducted a survey of all 364 TARP recipients on their use of government funds, something his office had requested Treasury do, only for the department to decline to do it except for Citigroup and Bank of America.

"One thing is clear: Complaints that it was impractical, impossible or a waste of time to require banks to detail how they used TARP funds were unfounded," Barofsky said.

"The survey strongly supports my earlier recommendation to Treasury," he emphasized. "Banks can and should be required to report on their use of taxpayer money to provide maximum transparency and not simply be asked to report on the possible impact of the funds, such as giving only lending activity."

rassley Says Program Must Increase Transparency

Ranking committee member Sen. Chuck Grassley, R-Iowa said the administration must start living up to its promise to increase the program's transparency.

"Unfortunately, despite saying all the right things about open government, the new administration has not made any major changes aimed at making TARP more transparent," he said. "Moreover, I have heard about potential problems with access to information from all three of the oversight bodies testifying."

Barofsky also told the committee about concerns his office now has to monitor nearly $3 trillion, which "is just short of what the entire federal government spent in fiscal year 2008. Committee Chairman Max Baucus, D-Mont., noted, "It's like having a second United States government budget dedicated solely to saving the financial system, and that is truly surreal."

And Baucus cautioned that this number could skyrocket to $7 trillion when other measures are added, such as $3 trillion in Federal Reserve programs, Treasury's $400 billion support for Fannie Mae and Freddie Mac, and the administration's budget request for a placeholder worth up to $750 billion.

"If all these additional amounts materialize, taxpayers could be on the hook for a total of more than $7 trillion," Baucus said. "This is a huge, unprecedented financial commitment. It strains the comprehension of taxpayers and policymakers alike."

Barofsky and Warren weren't the only watchdogs to express concerns today. Gene Dodaro of the Government Accountability Office warned that Treasury would be hard-pressed to get additional funds approved by Congress unless it improves its communication strategy.

"Treasury continues to struggle with developing an effective overall communication strategy that is integrated into TARP operations," said a new GAO report released today. "Without such a strategy, Treasury may face challenges should it need additional funding for the program."

Barofsky said the TARP likely has $109 billion left in it , not $135 billion as stated by Secretary Tim Geithner Sunday on ABC's "This Week," but the difference, he said, stems from Treasury calculating an anticipated return of about $25 billion from banks paying back TARP money as they get out of the program.

The GAO Says Treasury Has $109 Billion Left to Dole Out

The GAO report also said Treasury had about $109 billion left to allocate. Dodaro said Treasury has announced funding for TARP at $667.4 billion, but expects to spend only about $590 billion of that. So far, they have already spent $303 billion.

Barofsky also announced today that next week his office, after receiving a letter from 27 members of Congress, would announce an audit into AIG's TARP money that's going to counterparties. Also next week, Warren's Congressional Oversight Panel will release its fifth oversight report on TARP.

After today's hearing on Capitol Hill, that report will not likely be rosy.