BLOG VIEW: The Case Of The Runaway TARP

Written by Jessica Lillian
on April 02, 2009 No Comments
Categories : Blog View

Remember the Troubled Asset Relief Program (TARP)? This financial relief initiative has morphed several times since its rollout last year, of course, and it has been joined by several additional rounds of complementary financial efforts intended to jump-start our economy.

But your TARP, the original-recipe bailout staple, is indeed still running, and to complete the classic line, yes, you'd better go catch it – because it appears some of our leaders in the federal government are having trouble keeping track of the TARP.

An alarming – though somewhat underreported – accounting discrepancy has recently emerged regarding the remaining uncommitted TARP dollars.

Last week, Treasury Secretary Timothy Geithner told ABC's George Stephanopolous that his department has approximately $135 billion in uncommitted TARP money remaining. As Stephanopolous and others subsequently noted, however, official reports have stated that only about $32 billion remain in TARP reserves.

‘Less is out the door, but in terms of – if you look at what's not committed yet – it's roughly in the $130 billion to $135 billion range,’ Geithner explained when asked about this rogue $100 billion.

‘Now, that estimate includes a judgment, a very conservative judgment, about how much money is likely to come back from banks that are strong enough to not need this capital now to get us through a recession,’ he continued.

Even if this explanation makes complete sense to you, and even if those ‘very conservative’ estimates prove to be accurate, for the sake of coordination and clarity, shouldn't the various parties working with TARP at least try to work under the same set of numerical assumptions rather than operating billions of dollars apart from each other?

Better yet, shouldn't there be some sort of oversight to this process to ensure everyone is on the same page – and prevent these sorts of embarrassing discrepancies from appearing? Good thing a specially appointed oversight panel and the U.S. Government Accountability Office (GAO) are around to keep tabs on the Treasury and protect taxpayer money from inappropriate use, right?

Unfortunately, however, it seems that our accounting-challenged Treasury has also been unwilling to cooperate with both forms of oversight efforts so far.

This $100 billion accounting difference is emblematic of some appalling confusion and lack of transparency with TARP execution.

‘The oversight panel has repeatedly called on Treasury to articulate a clear strategy for its use of TARP funds,’ stated Elizabeth Warren, chair of the Congressional Oversight Panel, in her recent testimony to the Senate Finance Committee. ‘The absence of such a vision hampers oversight.’

‘In fact, our first report outlined a series of 10 basic questions, starting with the question, 'What is Treasury's strategy?'’ she continued. ‘Months later, Congress and the American public have no clear answer to that question. The ongoing uncertainty has hindered recovery efforts.’

Warren further noted she has sent two formal letters to Geithner specifically requesting some answers to these crucial transparency and accountability questions, but has received no ‘substantive’ response. ‘We do not seem to be a priority for the Treasury Department,’ she said.

In all fairness, the Treasury has a full plate at the moment, to say the least, and a critically low number of official members on board to manage that overflowing plate of financial problems.

Last week on MortgageOrb, we discussed a few of the ironies of this financial crisis. Here's another: During a recession characterized by steep job losses and crowds of newly unemployed Americans, the one place with open positions galore is the Treasury Department.

Clearly, given the lack of response to Warren (who, it must be reiterated, has been officially charged with keeping an eye on the TARP and should rank fairly high in correspondence priority), the communications department is one of those divisions sorely in need of a bolstered staff.

The GAO agrees. ‘Given the complexity of the issues involved and the heightened public scrutiny, an effective communications strategy continues to be critical, but Treasury has yet to develop a means of regularly and routinely communicating its activities to relevant congressional committees and members, the public and other critical stakeholders,’ the office points out in a scathingly critical March report on the Treasury's progress – or lack thereof – in successfully implementing TARP.

‘For example, TARP has received approximately $2.9 billion in dividend payments through March 20, 2009, but this information has not been reported to the Congress and the public,’ the report notes.

More accounting and reporting issues? Perhaps this untidy program execution calls for some public participation to corral the runaway TARP.

If you have some spare time and are interested in assisting the under-staffed Treasury department on a volunteer basis, visit the recently unveiled www.financialstability.gov. This site is the Obama administration's long-anticipated bailout-specific destination for (self-professed) transparency and accountability.

Along with a glossary of financial terms and a collection of freshly issued press releases, the Web site includes extensive listings of where TARP money has been doled out so far.

Perhaps we should all perform our own remaining-funds calculations based on those lists and e-mail our findings to Geithner. It appears he could use the accounting help.

I've previously noted several notable merits of financial rescue plans' various editions and still believe all of these initiatives at least have the potential to bring us toward financial recovery.

So far, however, program execution has left much to be desired.

– Jessica Lillian
, Commercial Mortgage Insight

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