January 09, 2009 |
|In a report scheduled to be released Friday, the Congressional panel overseeing the $700 billion federal bailout has expressed growing concern about the effectiveness and execution of the rescue plan.|
A draft of the report obtained by The New York Times criticized the Treasury Department for its “shifting explanations” about the underlying purpose of the bailout, its failure to answer many of the panel’s questions and its failure to require financial institutions receiving bailout money to fully account for how they are using the public’s money.
“The recent refusal of certain private financial institutions to provide any accounting of how they are using taxpayer money undermines public confidence,” the draft of the report said. “For Treasury to advance funds to these institutions without requiring more transparency further erodes the very confidence Treasury seeks to restore,” it said.
The 45-page report also asserted that the Treasury, in defiance of what the panel claimed was Congress’s clear intent when it passed the bailout bill in October, had taken “no steps to use any of this money to alleviate the foreclosure crisis.”
The Treasury declined to comment on the panel’s latest findings, with the bailout, known as the Troubled Asset Relief Program, or TARP. “We can’t comment on a report that’s not been shared with us,” said Brookly McLaughlin, a spokeswoman for the Treasury.
But in testimony to Congress and elsewhere, Neel T. Kashkari, the Treasury official overseeing the bailout, has repeatedly asserted that the rescue plan is in fact working as intended. While cautioning that its full effect will take time to register, he has argued that the rescue plan has already begun to reduce foreclosures while also providing crucial stability and liquidity to the financial system.
“The most important evidence that our strategy is working is that Treasury’s actions, in combination with other actions, stemmed a series of financial institution failures,” Mr. Kashkari wrote last week in a letter to the Congressional oversight panel.
According to a running tally by The Times, the Treasury has already committed $359 billion of the $700 billion to banks, credit card companies, automakers and insurance companies, among others. The oversight panel’s latest assessments are likely to fuel the debate over how to spend the remainder of the bailout money.
Yet they also come as members of Congress are discussing how to fashion a huge new stimulus bill that President-elect Barack Obama has said he hopes to sign soon after Inauguration Day, Jan. 20. Officials from the Obama transition team have said that the cost of the stimulus package could well exceed the $700 billion bailout.
The Congressional oversight panel has three Democratic appointees and two Republican appointees. It is led by Elizabeth Warren, a Harvard law professor and an expert on bankruptcy and credit card issues. A spokesman for the panel declined to comment on the draft report.
The preliminary report raises new questions about the single biggest component of the bailout, the Capital Purchase Program, under which the government has invested tax dollars into scores of banks it judges to be healthy. According to the Treasury, the government has injected $177.5 billion in bailout money into 214 financial institutions in 40 states and Puerto Rico, as of Dec. 31.
The report, though, questioned whether the Treasury could accurately assess the health of these banks, especially given the collapses of several banks that were once deemed to be healthy by federal regulators.
By DAVID BARSTOW