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Nothing Being Done About Treasury Department's Negligence

Published 01/09/09 Dustin Ensinger - Print Article
E-mail - editor@economyincisis.org

The Congressional panel charged with conducting oversight of the $700 billion federal bailout released a report on Friday that is highly critical of the way in which the Treasury Department has handled the funds.

The 45-page report slams the Troubled Assets Relief Program (TARP) for a lack of transparency, clear goals and measures to stop the slew of home foreclosures which triggered the economic crisis.

“The recent refusal of certain private financial institutions to provide any accounting of how they are using taxpayer money undermines public confidence,” the draft of the report said. “For the Treasury to advance funds to these institutions without requiring more transparency further erodes the very confidence the Treasury seeks to restore,” the report says.

Of the original $700 billion, $359 billion has already been allocated to financial institutions, the car industry, credit card companies and others. Elizabeth Warren, who leads the panel that issued the report, told ABC news that not a penny of that money had been used to help struggling homeowners and stabilize the deteriorating housing market.

"There's just no money that's gone in that direction. This one's not even arguable," she said. "The TARP funds themselves have not been used in this way despite congressional statutes requiring them to do so."

The original plan was for the money to be used to stabilize the housing market, however, the Treasury Department later decided that capital infusions directly into financial institutions would thaw the frozen credit market and thus stabilize the housing market. Overall, they have injected $177.5 billion into banks, many of which were healthy and didn’t want or need the money, and the credit market is still frozen and people are still losing their homes.

"For Treasury to take no steps to use any of this money to alleviate the foreclosure crisis raises questions about whether Treasury has complied with Congress's intent that Treasury develop a 'plan that seeks to maximize assistance for homeowners,'" the panel said in the report.

Before the remainder of the TARP funds are allocated there should be a clearly articulated goal as to what the funds are intended to do so the effectiveness of the plan can actually be measured. Additionally, there needs to be a much greater degree of transparency so that taxpayers can see exactly where their money is going and how it is being used. Finally, the rest of the money should be used for its original intent - helping struggling homeowners to stay in their homes. If these conditions are not met, neither the Obama or the Bush administration should be allowed to tap the remainder of the funds.

Source The New York Times:

In a report scheduled to be released Friday, the Congressional panel overseeing the $700 billion federal bailout has expressed growing concern about the effectiveness and execution of the rescue plan.

A draft of the report obtained by The New York Times criticized the Treasury Department for its “shifting explanations” about the underlying purpose of the bailout, its failure to answer many of the panel’s questions and its failure to require financial institutions receiving bailout money to fully account for how they are using the public’s money.

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