Sorry if this is a repost. Not sure how long Barofsky will have his job.
bailoutsleuth.com
The Treasury Department rejected a suggestion by the top watchdog overseeing the Troubled Asset Relief Program that it require participants to account for their use of taxpayer money through internal controls and sworn, periodic reports.
Neil M. Barfosky, special inspector general for the $700 billion TARP initiative, noted in his quarterly report to Congress last week that Treasury said it would not adopt those recommendations. In that report, he said that the possible expansion of TARP to include insurance companies made disclosure more important than ever.
"The American people have a right to know how their tax dollars are being used, particularly as billions of dollars are going to institutions for which banking is certainly not part of the institution's core business and may be little more than a way to gain access to the low-cost capital provided under TARP," the report said.
The inspector general's office made a similar recommendation in a previous report. In the most recently released assessment, it said that Treasury had rejected its specific recommendations that all TARP recipients be required to:
Account for the use of TARP funds
Set up internal controls to comply with such accounting
Report periodically to Treasury on the results, with appropriate sworn certifications
So far, disclosure requirements have been limited to broad summaries of general lending activities that do not identify how the money received under TARP was spent.
Barofsky's office decided in January to seek more detailed information by surveying the 364 companies that had received funds through the end of that month.
"Although the results of the survey still need to be analyzed, one thing is clear: Treasury's arguments that such an accounting was impractical, impossible or a waste of time because of the inherent fungibility of money were unfounded,' the report said.
"Banks generally provided a reasonable level of detail regarding their use of TARP funds, and, while the response quality was not uniform, some banks were able to provide detailed, at times even granular , descriptions of how they used taxpayer money.'
The inspector general's office also warned that the Term Asset-Backed Securities Loan Facility was vulnerable to fraud and offered a series of recommendations to prevent it.
Under the TALF program, the federal government lends money to investors who buy securities backed by consumer loans. How these securities should be valued is a critical and controversial question, because if the government lends money based on inflated values, it could lose money disproportionate to the risk if the loans fail.
To avoid the risk of fraud and self-dealing, the Treasury ought to require public disclosure of the borrowers posting the securitized collateral, the inspector general's office said. In addition, it recommended that Treasury conduct independent assessments of the values of the securities, rather than rely on the judgments of ratings agencies.
Those agencies have come under criticism in the last year because of their positive reviews of many of the mortgage-backed securities that contributed to the current economic downturn.
The inspector general's office also recommended that Treasury provide "clarity" on the question of executive pay for firms participating in the TALF program. The program has drawn fewer participants than expected, in part, some believe, because of concern that participation will make them vulnerable to limits on how much they can pay their top employees. |
