This afternoon, the Government Accountability Office (GAO) released the first in a series of Congressionally-mandated oversight reports on the Troubled Asset Relief Program (TARP) established in the economic rescue package. GAO found:
Treasury has yet to address a number of critical issues, including determining how it will ensure that CPP is achieving its intended goals and monitoring compliance with limitations on executive compensation and dividend payments. Moreover, further actions are needed to formalize transition planning efforts and establish an effective management structure and an essential system of internal control. To help ensure the program's integrity, accountability, and transparency, GAO recommends that Treasury:
work with the bank regulators to establish a systematic means of determining and reporting in a timely manner whether financial institutions' activities are generally consistent with the purposes of CPP and help ensure an appropriate level of accountability and transparency;
develop a means to ensure that institutions participating in CPP comply with key program requirements (e.g., executive compensation, dividend payments, and the repurchase of stock);
formalize the existing communication strategy to ensure that external stakeholders, including Congress, are informed about the program's current strategy and activities and understand the rationale for changes in this strategy to avoid information gaps and surprises;
facilitate a smooth transition to the new administration by building on and formalizing ongoing activities, including ensuring that key OFS leadership positions are filled during and after the transition;
expedite OFS's hiring efforts to ensure that Treasury has the personnel needed to carry out and oversee TARP;
ensure that sufficient personnel are assigned and properly trained to oversee the performance of all contractors, especially for Contracts priced on a time and materials basis, and move toward fixed-price arrangements whenever possible;
continue to develop a comprehensive system of internal control over TARP, including policies, procedures, and guidance that are robust enough to protect taxpayers interests and ensure that the program objectives are being met;
issue final regulations on conflicts of interest quickly and review and renegotiate mitigation plans to enhance specificity and compliance; and
institute a system to effectively manage and monitor the mitigation of conflicts of interest.
Speaker Pelosi on the GAO report:
The GAO's discouraging report makes clear that the Treasury Department's implementation of the TARP is insufficiently transparent and is not accountable to American taxpayers. As part of its flagship program to invest directly in financial institutions, the Treasury Department failed to impose conditions on the use of government funds, which were intended to help ease the credit crunch, undermining the intent of the Emergency Economic Stabilization Act and public confidence.
Congress has repeatedly expressed concerns to the Treasury Department about the need to improve the TARP's accountability and transparency. The GAO report reaffirms Congress' view and calls on Treasury to take several critical steps to accomplish this goal, specifically by improving its communication with Congress and the general public.
The lack of any requirement by the Administration on how financial institutions use these capital infusions is in clear contrast to Congress requiring detailed plans for long-term viability from the domestic auto companies. It is difficult to comprehend why the Bush Administration refuses to provide short term emergency auto industry loans through the TARP–when we know bankruptcy is not an option for the automakers or our economy.
We welcome the GAO's continued monitoring of the Treasury Department's actions and look forward to the Congressional Oversight Board's report on TARP implementation on December 10.
Congress also remains concerned that the Administration has failed to implement a foreclosure mitigation plan to help millions of families stay in their homes as required under the financial rescue legislation. Preventing foreclosures will slow the nationwide drop in home values, protect neighborhoods, and is essential to address the root cause of our economic crisis.