TARP Special Inspector General Slams Treasury In Congressional Testimony

Posted by Orb Staff on July 21, 2009 No Comments
Categories : Residential Mortgage

nancial Stability Oversight Board (Oversight Board) has issued its third quarterly [link=http://financialstability.gov/docs/FSOB/FINSOB-Qrtly-Rpt-063009.pdf][u]report[/u][/link] to Congress on the Emergency Economic Stabilization Act (EESA). The report, which covers the period from April 1 to June 30, indicates the Oversight Board's belief that the Treasury's actions under the EESA continued to provide ‘meaningful support to core financial markets during the second quarter,’ according to a Federal Reserve press statement. ‘The [Troubled Asset Relief Program (TARP)] has been a key stabilizing factor for the financial system and has likely prevented a greater deterioration in the availability of credit to households, businesses and communities," the statement says. However, in prepared testimony scheduled before the House Committee on Oversight and Government Reform, TARP's special inspector general, Neil Barofsky, portrays the Treasury as unreceptive to recommendations on how the program can achieve greater transparency. "Although Treasury has taken some steps towards improving transparency in TARP programs, it has repeatedly failed to adopt recommendations that [the special inspector general] believes are essential to providing basic transparency and fulfill Treasury's stated commitment to implement TARP "with the highest degree of accountability and transparency possible,'" says Barosky's testimony, which was posted on the Wall Street Journal's [link=http://online.wsj.com/article/SB124810729729665611.html][u]Web site[/u][/link]. For example, one of Barofsky's first recommendations was for the Treasury to require all TARP recipients to report on the actual use of TARP funds. Aside from a handful of agreements with Citigroup, Bank of America and AIG, the Treasury has rejected this suggestion. "Treasury's default position should always be to require more disclosure rather than less and to provide the investors in TARP – the American taxpayers – as much information about what is being done with their money as possible," Barofsky's testimony continues. In refusing to adopt such transparency recommendations, "TARP has become a program in which taxpayers are not being told what most of the TARP recipients are doing with their money, have still not been told how much their substantial investments are worth, and will not be told the full details of how their money is being invested," according to Barofsky's prepared remarks. Barofsky's testimony also highlights the Treasury's refusal to adopt what he calls one of his office's "most fundamental recommendations": that the department require an informational barrier between fund managers of the Public Private Investment Fund (PPIF) and employees of said fund management companies who manage non-PPIF funds. "Treasury has decided not to impose such a wall in this instance, despite the fact that such walls have been imposed upon asset managers in similar contexts in other government bailout-related programs, including by Treasury itself in other TARP-related activities, and despite the fact that three of the nine PPIF managers already must abide by similar walls in their work for those other programs," Barofsky's testimony says. SOURCES: FinancialStability.gov, Wall Street

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