Oversight of the Troubled Asset Relief Program

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The Emergency Economic Stabilization Act created the Troubled Assets Relief Program to administer up to $700 billion dollars. Several oversight mechanisms are established by the bill, many of which were not immediately implemented.

Contents 1 Financial Stability Oversight Board 2 Congressional Oversight Panel 3 Comptroller General oversight requirement 4 Office of the Special Inspector General 5 Claims that oversight has not been effective 5.1 Government officials overseeing bailout don't know how it's being spent 5.2 Banks won't say how they are spending bailout money 5.3 Federal government paid $254 billion for assets that were worth only $176 billion 5.4 Bailout recipients spent $114 million on lobbying and campaign contributions in 2008 5.5 Bank of America throws $10 million Super Bowl party 6 Oversight Efforts 6.1 XBRL Proposed as tool to aid in TARP Oversight 7 References

[edit] Financial Stability Oversight Board

The Financial Stability Oversight Board is created to review and make recommendations regarding the Treasury's actions.^[1] Its purpose is to review the operation of TARP, to make recommendations to the Treasury for improvements, and to watch for fraud and misrepresentation. The FSOB also has the power to ensure that the Treasury follows policies in accordance with the Act and the economic interest of the U.S. It is to meet on a monthly basis and report to Congress and the Oversight Panel quarterly.^[2]

The members of the board are:

• Chairman of the Board of the Federal Reserve (Currently Ben Bernanke)
• Secretary of the Treasury (Currently Timothy F. Geithner)
• Director of the Federal Housing Finance Agency (Currently James B. Lockhart III ^[3])
• Chairman of the Securities and Exchange Commission (Currently Mary Shapiro)
• Secretary of the Department of Housing and Urban Development (Currently Shaun Donovan)

[edit] Congressional Oversight Panel

^{[4] [5]}

The "Congressional Oversight Panel" was mandated by Title 1, Section 125 of the TARP legislation ^[6] as an "establishment in the legislative branch." The Congressional Oversight Panel is charged with the job of reviewing the state of the markets, current regulatory system, and the Treasury Department's management of the Troubled Asset Relief Program. The panel is required to report their findings to Congress every 30 days, counting from the first asset purchase made under the program. The panel must also submit a special report to Congress about regulatory reform on or before January 20, 2009.^[7] The Congressional Oversight Panel will cease to exist on December 31, 2009 unless renewed. ^[8]

The panel consists of five outside experts appointed as follows:

• One member chosen by the Speaker of the House (Nancy Pelosi selected Richard H. Neiman on November 14^[9]) ^[10]
• One member chosen by the minority leader of the House (John Boehner appointed Jeb Hensarling on November 19) ^[11]
• One member chosen by the majority leader of the Senate (Harry Reid appointed Elizabeth Warren on November 14)
• One member chosen by the minority leader of the Senate (Mitch McConnell appointed John E. Sununu on December 17 after his original choice Judd Gregg had "stepped aside" December 1 ^[12]).
• One member chosen by the Speaker of the House and the majority leader of the Senate, following consultation with the minority leaders of Congress (Damon Silvers ^[13] was appointed on November 14)

The first meeting of this board was held Wednesday, November 25 and elected Ms. Warren as the chairperson and Damon Silvers as deputy chairperson. As no assets have yet been purchased, (OFS instead chose to provide $250 billion to banks through the Capital Purchase Program) it is not clear whether the requirement to report after 30 days from "first asset purchase" has been violated.

[edit] Comptroller General oversight requirement

The Comptroller General (director of the Government Accountability Office) is required to monitor the performance of the program, and report findings to Congress every 60 days. The Comptroller General is also required to audit the program annually. The bill grants the Comptroller General access to all information, records, reports, data, etc. belonging to or in use by the program.^{[14] [15]}

On December 2, 2008, GAO released their first report on the bailout ^{[16] [17]}. Neel Kashkari, the OFS chairman, said in a letter to GAO ^[18] that the department agrees with the report's findings and most of its recommendations but questioned GAO's suggestion to require more reporting from banks, saying gathering specifics from individual banks might not be the best way to evaluate the program. House Speaker Nancy Pelosi called the report's findings "discouraging." ^[19] and that the report shows the program "is not accountable to American taxpayers."

[edit] Office of the Special Inspector General

The EESA creates the Office of the Special Inspector General for the Troubled Asset Relief Program, appointed by the President and confirmed by the Senate. The Special Inspector General's purpose is to monitor, audit and investigate the activities of the Treasury in the administration of the program, and report findings to Congress every quarter.^[14][20] Eric Thorson is the Inspector General of the US Department of the Treasury and currently is responsible for the oversight of the TARP but has expressed concerns about the difficulty of properly overseeing the complex program in addition to his regular responsibilities. Thorson called oversight of TARP a "mess" and later clarified this to say "The word 'mess' was a description of the difficulty my office would have in providing the proper level of oversight of the TARP while handling its growing workload, including conducting audits of certain failed banks and thrifts at the same time that efforts are underway to nominate a special inspector general." [1]

As of November 2008, Neil Barofsky has been nominated as the Special Treasury Department Inspector General with the express role of overseeing the TARP. Barofsky is undergoing senate confirmation hearings from the Senate Finance Committee.

[edit] Claims that oversight has not been effective

[edit] Government officials overseeing bailout don't know how it's being spent

A December 31, 2008 Associated Press article stated, "Government officials overseeing a $700 billion bailout have acknowledged difficulties tracking the money and assessing the program's effectiveness." ^[21]

A January 29, 2009 article from bloomberg.com stated, "Bloomberg News asked the Treasury Department Jan. 26 to disclose what securities it backed over the past two months in a second round of actions to prop up Bank of America Corp. and Citigroup Inc. Department spokeswoman Stephanie Cutter said Jan. 27 she would seek an answer. None had been provided by the close of business yesterday." ^[22]

[edit] Banks won't say how they are spending bailout money

A December 22, 2008 Associated Press article stated, "The Associated Press contacted 21 banks that received at least $1 billion in government money and asked four questions: How much has been spent? What was it spent on? How much is being held in savings, and what's the plan for the rest? None of the banks provided specific answers... Some banks said they simply didn't know where the money was going." ^[23]

A review of investor presentations and conference calls by executives of some two dozen US-based banks by the New York Times found that "few [banks] cited lending as a priority. An overwhelming majority saw the bailout program as a no-strings-attached windfall that could be used to pay down debt, acquire other businesses or invest for the future." ^[24]

[edit] Federal government paid $254 billion for assets that were worth only $176 billion

On February 5, 2009, Elizabeth Warren, chairperson of the Congressional Oversight Panel, told the Senate Banking Committee that during 2008, the federal government paid $254 billion for assets that were worth only $176 billion. ^[25]

[edit] Bailout recipients spent $114 million on lobbying and campaign contributions in 2008

On February 4, 2009, it was reported that during 2008, the companies that received bailout money had spent $114 million on lobbying and campaign contributions. These companies received $295 billion in bailout money. Sheila Krumholz, executive director of The Center for Responsive Politics, said of this information, "Even in the best economic times, you won't find an investment with a greater payoff than what these companies have been getting." ^[26]

[edit] Bank of America throws $10 million Super Bowl party

A February 2, 2009 ABC News article titled, "Bailed Out Bank of America Sponsors Super Bowl Fun Fest" stated that Bank of America sponsored a Super Bowl event at a five star resort in Palm Beach, which was described as "... a five day carnival-like affair... 850,000 square feet of sports games and interactive entertainment attractions for football fans..." Although the bank refused to answer ABC News' questions about the cost of the event, a confidential source told ABC that the cost was approximately $10 million. ^[27]

[edit] Oversight Efforts

[edit] XBRL Proposed as tool to aid in TARP Oversight

At the Domestic Policy Subcommittee hearing of the Oversight and Government Reform Committee on March 11, 2009, XBRL was proposed as a mechanism for automating the data entry and processing of financial filings to aid in TARP oversight. ^[28]

[edit] References