Criticized for lack of oversight of Troubled Assets Relief Program money, the Treasury official overseeing the $700 billion fund Wednesday detailed steps to improve monitoring of the program.
"We've heard the feedback," interim Assistant Secretary for Financial Stability Neel Kashkari told the House Financial Services Committee. "We got it. We are working on it."
Kashkari said Treasury will set up a monitoring program with banking regulators to better track how each bank is spending TARP dollars. The department is making changes after a scathing Government Accountability Office report called for more formal set-up of internal controls to ensure funds are used properly.
House Financial Services Chairman Barney Frank warned Treasury not to tap a remaining $350 billion left in the TARP fund when Congress adjourns this week. Under the law, Congress could vote to deny the funding, but the joint resolution makes it subject to a presidential veto -- a high threshold to kill it.
"Confidence is so important. Making the $350 [billion] drawdown controversial would do more harm than good, including sustaining a veto," Frank said.
He said Treasury should work with the incoming Obama administration to construct a plan early next year that would provide funding for foreclosure relief efforts and requirements for the department to track how institutions are spending TARP funds.
"I think they could put together a package, but a lot of work has to be done," Frank said.
He said he plans a hearing in January to get testimony from heads of banks that received TARP funds. Kashkari would not rule out that Treasury would request the remaining $350 billion this month.
"I'm not certain of the timing of any such submission," Kashkari said.
Several members said they would try to block such a request unless Treasury does more to help homeowners struggling to avoid defaulting on mortgages. "Don't come here and ask for another penny because if you do I am going to work 24 hours a day ... to make sure that they do not give you another dime," said Financial Services Housing Subcommittee Chairwoman Maxine Waters, D-Calif., who faulted Treasury for failing to adopt an FDIC proposal for mitigating foreclosures.
Kashkari emphasized that the TARP program aims to prevent financial collapse. "It is not an economic growth plan," he noted. "Imagine how many foreclosures we would have had if we had allowed the financial system to collapse," he said. Kashkari clarified Treasury's position on encouraging bank mergers. Treasury officials previously said they would use TARP funds to encourage acquisitions of weak banks by stronger ones, a stance that drew blasts of congressional criticism.
"It is absolutely not our policy to encourage mergers or consolidations in the banking industry," Kashkari said Wednesday, while reiterating that mergers could help the economy by stopping struggling banks from failing.
Lawmakers noted Wednesday that several TARP oversight mechanisms are beginning to function. The Senate this week confirmed a special inspector general to monitor the use of TARP funds and two members of a congressional panel overseeing TARP testified Wednesday. The Senate is scheduled Wednesday to hold a unanimous consent vote on a bill ensuring the special IG has power to oversee all TARP funds and giving the office temporary hiring authority. That allows the special IG to skip the usual months-long federal hiring process. House members are working on attaching the bill to an emergency funding bill for automakers, an aide said.