Months after Congress approved the $700 billion bailout of U.S. financial institutions, and after about $350 billion has already been spent, it’s not clear if the money is being used as required or whether it has helped banks facing losses or consumers facing foreclosure.
That’s the analysis by the Government Accountability Office. Meanwhile, a congressional oversight committee is trying to find its identity. One member has quit, another questions whether the oversight committee has enough information.
The GAO, fortunately, has been charged with reviewing effectiveness of the bank bailout program run by Treasury Secretary Henry Paulson. The report says the Treasury Department has “allocated” $335 billion of the money and “disbursed about $195 billion” but has “yet to address a number of critical issues.”
Most of those issues focus on how the Treasury Department will know its efforts are working to achieve intended goals of stabilizing financial markets, loosening up loan pipelines and preventing and mitigating the rate of foreclosures.
Treasury, the report says, has not yet set up ways to monitor compliance of the rules for limits on executive compensation, dividend payments and stock repurchases by the financial institutions who’ve already received assistance.
GAO says the Treasury Department needs to take nine actions to ensure accountability, integrity and transparency of the program. Those recommendations range from hiring more staff to adequately assess and run the program to working with bank regulators already in place to make sure banks are showing results for the money they get. They also recommend that Treasury has enough personnel who are properly trained to oversee contractors getting bailout money, and to set up conflict of interest rules so we don’t end up with fraud and waste a la Halliburton in Iraq.
So far, Treasury has spent $155 billion buying shares of some 87 financial institutions but the standard agreements with these institutions do not require them to track or report how they are using these capital investments, according to GAO. These banks, so far, don’t have to show or prove they’re using the money for its intended purpose of increasing credit flow.
Treasury is operating this program worse than a corner lemonade stand. Congress needs to light a fire under Paulson or his associates to immediately set up accountability and reporting standards. How tough can that be?
The GAO concludes that without such mechanisms and reporting requirements, “there is heightened risk that the interests of the government and taxpayers may not be adequately protected.”
Many average taxpayers disagreed with the decision to provide a bailout. That the use of their money is not being properly monitored will only add salt to a wound and further reduce support for any other bailout needed.
— The Free Press, Mankato, Minn.
