Frank, Obama call for better oversight of bailout funding
Comments come after an audit report urges Treasury to work more closely with regulators.
House Financial Services Committee Chairman Barney Frank, D-Mass., might hold an oversight hearing as early as next week on the Troubled Assets Relief Program after Tuesday's release of a blistering Government Accountability Office report that found the Treasury Department had not taken sufficient safeguards in monitoring allocation of the $700 billion program's funds.
The GAO found Treasury was not monitoring whether participating banks are starting to lend TARP money to businesses, and that it had few safeguards ensuring that firms adhere to executive pay caps and a ban on increasing their dividend payments.
"The American people received two kinds of news about the TARP program -- bad and worse news," Frank said. "The bad news was confirmation by the GAO in its first report about the program that Treasury has no way to measure whether taxpayer funds invested in banks are being used in accordance with the purpose of the law -- to increase lending. The much worse news is Treasury's response that it does not even have the intention of doing so."
Meanwhile, House Republican leaders Wednesday said Treasury should not request the remaining $350 billion until congressional questions about the program's safeguards are answered.
Neel Kashkari, interim assistant Treasury secretary overseeing TARP, said he agreed with some of the GAO's findings but disputed what Treasury needs to do to monitor how funds are spent by banks that have received government funding. Kashkari noted each contract places requirements on the participant and that Treasury is developing compliance programs to ensure the terms are upheld. But the GAO report has ratcheted up congressional criticism of the program's implementation, which could prompt lawmakers to consider killing the last of the $350 billion in the fund.
Treasury Secretary Henry Paulson has indicated he has no plans to notify lawmakers of his intent to use the last $350 billion, leaving the issue to the Obama administration. President-elect Obama said Wednesday his advisers are reviewing TARP and will take action, if necessary, to toughen standards.
"We are seeing some areas where we could be doing better in making sure that this money is not going to CEO compensation; that it's protecting taxpayers, that taxpayers are going to get their money back; that it's effective in shoring up our financial markets," Obama said. "My team is very active in reviewing what has already been done to ensure that when we hit the ground running on Jan. 20 that any taxpayer money is going to be properly spent."
He also said he would do more to prevent foreclosures, which could mean buying at-risk mortgages, the original intent of TARP.
Meanwhile, a spokeswoman for Senate Minority Leader Mitch McConnell, R-Ky., said he plans within days to name a new member to a board overseeing TARP after Budget Committee ranking member Judd Gregg, R-N.H., said he will step down from an appointment as one of two GOP members.
Gregg said in a statement Tuesday the potential of "an extremely large stimulus package," the economic downturn and upcoming budget issues made it "difficult to continue service on the TARP oversight board." Unlike Democrats, Republicans have appointed sitting lawmakers to the TARP board.
Dan Friedman contributed to this report.