Treasury's use of private contractors as part of the much-criticized Troubled Asset Relief Program raises "significant" transparency and conflict concerns, the Congressional Oversight Panel said in a report Thursday.
The panel, created by the TARP legislation to oversee the vast program, said that the Treasury Department had worked hard to mitigate such concerns, but the report authors added that deficiencies in broader government contracting standards raise particular concerns for the program's 96 private contracts -- together worth about $437 million.
The panel noted that private contractors were not subject to Freedom of Information Act requests or public audits of their performance, and in addition, private contractors could employ subcontractors without disclosure. It also criticized Treasury for relying too heavily on contractors to self-disclose conflicts and recommended an independent mechanism be established to gather such information.
"The largest TARP contracts have gone to law firms, investment management firms, and audit firms," the report said. "The nature of these firms' relationship to the financial system inevitably gives rise to a wide range of potential conflict issues, including the potential for conflicts of interest with these firms' other clients, self-interested behavior in the management of TARP contracts, and the misappropriation of sensitive market information."
The report could prove fodder for candidates campaigning against TARP, which, though it was considered largely successful in its task of staving off financial catastrophe, has few enthusiastic backers left on Capitol Hill.