The U.S. government cares little about spending restraints and accountability as it bails out America’s banking and financialbig shots. Financial Bailout Program Lacks Rules And AccountabilityBy Cliff Montgomery – Dec. 12th, 2008If you believe that the Senate Republicans who yesterday killed the Bush-Congressional deal to save America’s Big Three automakers were performing a serious stand against wild government spending and lack of accountability, you need to read the December 10th testimony of Gene Dodaro, acting head of the Government Accountability Office (GAO), before the House Committee on Financial Services.Entitled, Troubled Asset Relief Program (TARP): Additional Actions Needed to Better Ensure Integrity, Accountability, and Transparency, it reveals how little those in government actually care about spending restraints and accountability–at least as long as the issue is the bailout of America’s banking and financial big shots.Below we quote a key part of Dodaro’s testimony:“Treasury has taken a number of steps to try to stabilize the U.S. financial markets and banking system, including injecting billions of dollars into financial institutions.”Although Treasury initially planned to buy mortgages and mortgage-related assets through TARP, Treasury shifted its focus to a preferred stock and warrant purchase program, known as the Capital Purchase Program (CPP).”Treasury has provided more than $155 billion in capital to 87 institutions through CPP as of December 5, 2008.”It has also established a Systemically Significant Failing Institution (SSFI) program, through which Treasury may invest in any financial instrument, including debt, equity, or warrants determined to be a troubled asset, and continues to explore other programs, including those focused on insurance, foreclosure mitigation, and consumer lending.”As of December 5, 2008, Treasury had allocated a total of $335 billion of TARP funds and disbursed $195 billion to institutions under the various programs. While we recognize that TARP has existed for a short time and that a new program of such magnitude faces many challenges, especially in this current uncertain economic climate, we found that Treasury has yet to address a number of critical issues.”These include determining how it will ensure that CPP is achieving its intended goals and monitoring compliance with limitations on executive compensation, dividend payments, and stock repurchases.”Moreover, it has yet to formalize transition planning efforts given the upcoming shift to a new administration or to establish an effective management structure and an essential system of internal controls.”In our report, we recommended that Treasury take nine actions to help ensure the program’s integrity, accountability, and transparency. These would require that Treasury
- work with the bank regulators to establish a systematic means of determining and reporting in a timely manner whether financial institutions’ activities are generally consistent with the purposes of CPP and help ensure an appropriate level of accountability and transparency;
- develop a means to ensure that institutions participating in CPP comply with key program requirements (for example, executive compensation, dividend payments, and the repurchase of stock);
- formalize the existing communication strategy to ensure that external stakeholders, including Congress, are informed about the program’s current strategy and activities and understand the rationale for changes in this strategy to avoid information gaps and surprises;
- facilitate a smooth transition to the new administration by building on and formalizing ongoing activities, including ensuring that key OFS leadership positions are filled during and after the transition;
- expedite OFS’s hiring efforts to ensure that Treasury has the personnel needed to carry out and oversee TARP;
- ensure that sufficient personnel are assigned and properly trained to oversee the performance of all contractors, especially for contracts priced on a time-and-materials basis, and move toward fixed-price arrangements whenever possible;
- continue to develop a comprehensive system of internal control over TARP, including policies, procedures, and guidance that are robust enough to protect taxpayers’ interests and ensure that the program objectives are being met;
- issue final regulations on conflicts of interest quickly and review and renegotiate mitigation plans to enhance specificity and compliance; and
- institute a system to effectively manage and monitor the mitigation of conflicts of interest.
“In the short period covered by our report, Treasury has taken a number of important steps to set up TARP and to address the unfolding financial crisis. While immediate action is important, this urgency must be balanced against the need for strong management and oversight.”Because Treasury is establishing oversight policies and procedures at the same time that it is setting up the program, we found some lag in its administrative efforts, which we have highlighted in this statement and discussed in detail in our report.”Until these issues are resolved, there is heightened risk that the interests of the government and taxpayers may not be adequately protected and that OFS may not achieve its mission in an effective and efficient manner.”Like what you’re reading so far? Then why not order a full year (52 issues) of thee-newsletter for only $15? A major article covering an story not being told in the Corporate Press will be delivered to your email every Monday morning for a full year, for less than 30 cents an issue. Order Now! Wait, why does an independent news source run advertisements? The Spark answers in its advertising policy. * Please check out our ads–they help keep this news site running. Thanks!
