Tuesday, August 11, 2009

Where is the bailout money?



It is clear the war against unethical financial irresponsibility has been stalling. Billions, indeed trillions of dollars, have gone into the black hole known as bank bailout. There is little accountability, and apparently little transparency either.

When President Lincoln was faced with the losing end of the Civil War, he readily made changes to his War Department. Perhaps it's time for President Obama to review his troops and make changes to his Treasury Department.

If there is no financial oversight of TARP, how is there going to be financial oversight of the institutions? All the talk of financial regulatory reform is meaningless if there is no teeth to the oversight, no power to the overseers. Do they not go hand-in-hand? It's time someone from outside the circle of Wall Street power centers to shake up the self-interests and safeguard public interests.


Now there are many well-trained eyes with said eyes watching over the $700 billion bailout of the financial industry that began last year. How ever it is still tough to answer the basic question about where that money went.

We have a new oversight panel, special inspector general, the existing Government Accountability Office and eight other inspectors general. But those who have been in charge of minding the bailout store said they don't have the weapons needed.

Members of Congress have said that ten months into the Troubled Asset Relief Program or TARP, the oversight of the money has been lacking so much so that it is worthless.

"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," a special inspector general over the program reported last month. The "very credibility" of the program is at stake, it said.

Though the access and openness has improved in the past few months but the program still has a long way to go before it can be called transparent.

The Treasury Department said that it's fully committed to transparency and that it has taken steps to report the TARP status to the public. It regularly does post information on who has received money and details of each of those transactions. The Treasury also said it doesn't agree with all the recommendations from the watchdogs. They say some of the recommendations could hamper the programs effectiveness.

TARP was passed when the meltdown first started last fall. It was supposed to be a way to keep American banks from plunging deeper and deeper into the bottom-less pit of financial ruin.

From the beginning it was extremely controversial. Supporters claimed it helped spark lending. Critics claimed it unfairly rewarded the big banks and Wall Street firms for their bad behavior and starting the meltdown in the first place.

The TARP we have today is not the TARP we had originally. When Bush went to congress for money, TARP was only supposed to buy up hundreds of billions of dollars in bad mortgages and so-called mortgage-backed securities that were bought and sold on Wall Street.

But today TARP has expanded to 12 programs that sent hundreds of billions of dollars to big banks. But it has also used tax payer money to bailout American auto companies, auto suppliers, individuals delinquent on their mortgages, small businesses and AIG.

Watchdogs now have the task of overseeing the huge maze that has become TARP.

Just because you have tons of people watching, doesn't mean they get what they want to see.

Elizabeth Warren, a Harvard Law School professor who chairs a TARP oversight panel that was created by Congress. Her panel released 10 reports. The reports found that much of goals that the Treasury and Federal Reserve have are either unclear or contradictory.

One report called out the Treasury for vastly undervaluing more than $250 billion in transactions with the major banks. Another suggested ways to revamp the federal regulation of the financial sector. Other reports have sharply criticized the Treasury for it's defensiveness to opening it's books.

One thing the panel lacks is subpoena power. Which means it can ask but can't force officials from the Treasury, Federal Reserve or the banks to testify. It lacks this all important power even despite its mandate.

Henry Paulson, Bush's Treasury secretary, repeatedly stiffed the panel. Timothy Geithner, Obama's Treasury secretary has been slightly more open but only has testified once. Now Geithner is expected to testify in September and he has agreed to do so every 3 months.

The relative lack of testimony from top officials, however, is one reason why critics of Warren's panel think it hasn't delivered on its promise.

Republican Rep. Kevin Brady of Texas surprised Warren with an aggressive critique of the panel, saying it's failed to help taxpayers understand what the Treasury is doing with the billions at its disposal.

"There's been very little value that the panel has brought to this issue or even insight on how these bailout dollars have been used," he said. "I frankly believe at this point, given the reports that we've seen again with little value, I think the panel needs to be abolished."

Warren defended the panel's work, saying the lack of subpoena power means we "only have the capacity to invite" witnesses.

"So you asked Secretary Paulson in the first month of existence?" Brady asked.

"I believe we asked him repeatedly," Warren said. "We asked him in our first month, in our second month, in our third month."

Warren took the criticism seriously, she dropped by Brady's office as soon as the hearings were over. The two had never met before, she said, and "I was really surprised," by his comments.

"He said he felt frustrated," she said. "He wanted us to be even blunter" in the panel's reports.

Brady amplified his comments in an interview last month, saying that some of the panel's work seems like a "PR ploy" and that "the moment has passed" for Warren's group to play the role Congress envisioned.

Jeb Hensarling (Rep. TX) said that "taxpayers have not received answers as to whether the TARP program works, how decisions are being made or what the banks are doing with the taxpayers' money." While he praises the "very smart people on the panel," he said too many questions have been left unexplored.

He acknowledges that the lack of subpoena power makes things tough. "But even if we had it, I'm not sure we would have used it," said Hensarling, who's pushing to abolish TARP.

The other primary watchdog is Neil Barofsky , a special inspector general named in November by Bush specifically to track TARP funds. His office does have subpoena power, and a growing staff that's expected ultimately to have 160 people pursuing audits and criminal investigations.

Barofsky and his office have made recommendations to the Treasury that it do more to reveal how TARP funds will be spent. The Treasury have taken some of the recommendations and rejected others. One of the most important rejections was to give taxpayers precise details on how TARP funds have been used by the banks they bailed out.

Its one of the most basic things taxpayers want to know about TARP. How the $218 billion that was invested into 650 banks is being used.

Barofsky's office has long advocated that the Treasury require banks to detail how the TARP money they've received has been used. The department has refused, saying that once an investment is made in a big bank, it's not possible to track how it's used.

Barofsky's office rejected that assertion, and did its own survey of 360 institutions, finding that most could say how they'd used the money.

"Treasury's reasons for refusing to adopt this recommendation have been squarely refuted by" the inspector general, his office reported to Congress.

As most of you know I am a liberal but I was not en-favor of the bailout. No one is too big to fail and if it is, why is it too big to fail? The fat cats on Wall Street need to know there are consequences to their actions. We have started a precedent that if you are a bank CEO and run your company into the ground. Well that's no problem because the government will just bail you out. No criminal investigations have been launched into finding out if crimes were committed. These guys are still paying out record "retention bonuses" to the very same people who ruined these companies in the first place. But we as American's have to accept our part in the financial crisis. We should have not taken on these mortgages that we knew we could not afford.

Sean Hanity did a special report called Waste 101 a while back. I did like the special because it showed how some of the bailout money is being spent on ridiculous projects. Bush started the bailout and Obama continued it. We need to hold our elected officials responsible for their actions on how they spend our hard earned tax dollars. But that is just my personal opinion on the matter.

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