Strengthening Oversight of Financial Rescue Funds
On March 25, the House passed a measure to strengthen oversight of the financial stability fund known as TARP (S. 383) – sending this critical accountability measure (passed by the Senate on Feb. 4) to the President’s desk.
Strengthening oversight of TARP is critical to making sure that taxpayers’ funds are effectively used to get credit flowing to businesses and families, strengthen our economy, and are invested prudently to ensure the best possible return for U.S. taxpayers. This bill expands the Special Inspector General’s authority to ensure the efficient and effective use of taxpayers’ funds.
The bill broaden the authority of the Special Inspector General (SIG) to oversee the financial rescue program enacted last fall by the Bush Administration by
- allowing the SIG to audit or investigate any action taken under the financial rescue law;
- giving the SIG authority to hire more auditors and investigators quickly;
- requiring Treasury to explain why any recommendations by the SIG are not followed; and
- mandating the SIG to report to Congress by September 2009 on how recipients of TARP funds are spending American taxpayer dollars.
Last Fall’s financial rescue plan was designed to stabilize financial institutions, restore the flow of credit to businesses and families, and help homeowners. Despite objections of the Bush Administration, the measure was written to maximize the returns to the taxpayers for this investment and provide some public accountability for the exercise of the authority.
The Bush administration failed to uphold the intent of the law. Recipients of TARP funds were effectively given a free pass by Secretary Paulson – not helping homeowners and small businesses, but choosing to hoard taxpayer funds, buy other companies, and pay lavish executive bonuses – as symbolized by AIG.
The Congressional Oversight Panel has concluded that there were “what appear to be significant gaps in Treasury’s monitoring of the use of taxpayer money.” The Inspector General said he needs more staff to conduct proper oversight, and warned that billions of dollars could be lost to fraud without adequate oversight. [2/24/09]
The Bush plan is currently being overhauled by the Obama Administration – with new limits on executive compensation, and strengthened accountability and transparency. The Treasury Department issued new regulations for executive compensation, and the American Recovery and Reinvestment Act expanded them. More will be done.
Congress and the Obama Administration will next reform the regulatory structure of our financial system, creating a new systemic risk “macro-regulator” to restore common sense to how institutions are making money so that risky bets don’t jeopardize our entire financial system again.