Effectively managing and overseeing the Troubled Asset Relief Program

The Emergency Economic Stabilization Act of 2008 was enacted in response to a severe tightening in credit markets. The act created the Office of Financial Stability to implement the Troubled Asset Relief Program (TARP). This program provides Treasury a broad set of tools ranging from purchasing troubled mortgages and securities backed by those mortgages to infusing capital into the financial system to stimulate credit markets and stabilize financial markets. TARP, which is in its early stages of its creation, will require both effective management and diligent oversight to ensure that it effectively fulfills the purposes of the act.

The act also provides a prominent role for GAO in the oversight of the TARP. Specifically, we are tasked with performing ongoing oversight of a wide range of issues including TARP's performance in meeting the purposes of the act; the financial condition and internal controls of TARP, the characteristics of both asset purchases and the disposition of assets acquired, including any related commitments that are entered into; TARP's efficiency in using the funds appropriated for the program's operation; TARP's compliance with applicable laws and regulations; efforts to prevent, identify, and minimize conflicts of interest of those involved in TARP's operations; and the efficacy of contracting procedures. We are responsible for submitting reports to Congress at least every 60 days regarding findings in these areas. We are also responsible for auditing the office's annual financial statements, issuing a report on leveraging and deleveraging, and issuing special reports that emerge from our oversight.

^ Back to topWhat Needs to Be Done

The Treasury is still in the process of organizing the program and its implementation strategy is evolving. However, ensuring the effectiveness of the program requires tackling a number of key issues related to the management and oversight of TARP, including

• working 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 Capital Purchase Program (CPP) and help ensure an appropriate level of accountability and transparency;
• developing a means to ensure that institutions participating in the  CPP comply with key program requirements (for example executive compensation, dividend payments, and the repurchase of stock);
• formalizing 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;
• facilitating a smooth transition to the new administration by building on and formalizing ongoing activities, including ensuring that key Office of Financial Stability (OFS) leadership positions are filled during and after the transition;
• expediting OFS’s hiring efforts to ensure that Treasury has the personnel needed to carry out and oversee TARP;
• ensuring 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;
• continuing 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;
• issuing final regulations on conflicts of interest quickly and review and renegotiate mitigation plans to enhance specificity and compliance; and
• instituting a system to effectively manage and monitor the mitigation of conflicts of interest.
  

^ Back to topKey Reports

Troubled Asset Relief Program: Additional Actions Needed to Better Ensure Integrity, Accountability, and Transparency

GAO-09-161, December 2, 2008

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