After reading several reports this week on the Bail out I was struck by the wholesale lack of oversight in this mess. The problem in an economic climate like this isn't that doing nothing is wrong but many times when the heat is on like it is now, with the economy in a greed induced lurch like it is now the last thing we need to do is
do things first the ask questions later. Much like we've done with all these bailouts. Sadly we've Paved a yellow brick road to no where all built on the best of intentions & paid for by our grand children's future at the expense of our posterity.
What this report shows is tantamount to no oversight at Treasury and what some would say points to borderline criminal behavior on both sides of the bail outs.
Below is a summary I put together that covers the oversight issues brought forth last month. its rather nauseating.
In its first report to Congress on December 10, 2008, the Congressional Oversight Body asked ten questions – in essence asking for an account of the U.S. Department of Treasury’s about the Troubled Asset Relief Program (TARP).
the Congressional Oversight Body’s questions, in turn, included a number of subordinate questions, which sought additional details from the Treasury. In total, the Congressional Oversight Body wanted responses to 45 separate questions about the execution of the authority granted to Treasury under the Emergency Economic Stabilization Act & the $350 billion in taxpayer funds that has been alloted under the program. On December 30, 2008, Treasury responded to the Congressional Oversight Body with a 13-page letter. While the letter provided responses to some of the Congressional Oversight Body’s questions & shed light on Treasury’s decision-making process, it did not provide complete answers to several of the questions & failed to address a number of the questions at all. To gain a more complete understanding of what Treasury is doing & why, the Congressional Oversight Body is asking the Treasury to provide additional information clarifying its earlier responses.
In order to utilize its legally-mandated supervision role, the Congressional Oversight Body has created a series of fact-finding endeavors & independent investigations that will be the subject of future reports. But the Congressional Oversight Body’s independent work doesn't eliminate the need for Treasury to respond to the Congressional Oversight Body’s questions. Some of these questions can be answered only by Treasury as in Treasury’s strategic plans & other members seek to clarify substantial cracks in Treasury’s over sight on the use of taxpayer money & asking financial establishments to account for what they have done with taxpayer funds.
To alleviate the encumbrance on Treasury & to make it well-defined what questions persist to be unanswered, the Congressional Oversight Body constructed a grid with its original questions & Treasury’s responses.
Though many questions stay conspicuous, the Congressional Oversight Body details 4 fields that need specialized attention:
Bank Responsibility. the Congressional Oversight Body still doesn't know what the banks are doing with taxpayer cash. Treasury puts substantial emphasis in its December 30 letter on the value of restoring security in the market. So long as investors & customers are uncertain about how taxpayer funds are being used, they question both the health & the sound administration of all financial establishments. The late denial of specific private financial establishments to render any accountancy of this questionable use of taxpayer money undermines taxpayer trust.
For Treasury to front funds to organizations with out requiring more clarity undermines the very assurance Treasury seeks to restore. Ultimately, the new loans given by Treasury to the auto industry, with their elaborated conditions touching every feature of the administration of those commercial enterprises, highlights the lack of such terms in the bulk of TARP dealings. The Emergency Economic Stabilization Act doesn't require recipients of TARP funds to make reports on the use of funds. Nevertheless, it is inside Treasury’s control to make receipt of such information a stipulation to receive funding, to lay down criterion for TARP recipient conduct, or to have official procedures for reporting by TARP recipient role establishments or guidelines on the use of funds. The espousal of any of these alternatives would foster the building & restoring of taxpayers, investors, & policy makers confidence.
Transparency & Asset Evaluation. The need for clearness is closely related to the issue of responsibility. The confidence that Treasury looks for, can be restored only when data is completely crystal clear & trustworthy. Presently, Treasury’s plan of action appears to involve allocating the majority of the $700 billion to “healthy banks,” banks that have been assessed by their regulators as viable without federal assistance. Of course, whether a bank is “healthy” depends critically on the valuation of the bank’s assets. If the banks have not yet recognized losses associated with over-valued assets, then their balance sheets – & Treasury’s assessment of their health – may be suspect.
Many understood the purpose of Emergency Economic Stabilization Act to be providing aid to financial establishments that were “sick” & at risk of collapse. Such establishments were at risk, the public was told, due to so-called toxic assets that were impairing their balance sheets. Emergency Economic Stabilization Act was designed to provide a device to remove or otherwise provide clear value to those assets. The case of Citigroup exemplify this difficulty. Treasury rendered to Citigroup a $25 billion cash infusion as part of the “healthy banks” program whereby Treasury made nine initial investments in major banks. 2 months later, Treasury provided Citigroup with $20 billion in additional equity financing, to avoid systemic failure, but it did not categorize that finance as part of the Systemically Significant Failing Institution program (SSFI program). These cases indicate the marketplace measures the possessions of some banks easily under Treasury’s appraisal. To date no such device to furnish a more crystal clear asset valuation has been formulated, meaning that the danger posed by those toxic assets remains unaddressable. The house of cards that induced the economic situation has its base in toxic home mortgages. Until asset value is fully transparent & the market is positive the banks have written down bad loans & priced their assets accurately, attempts to regenerate order & assurance in the financial system will fail.
Foreclosures. The crisis in the housing sector proceeds to impact efforts at recuperation. In enacting Emergency Economic Stabilization Act, Congress called upon Treasury to implement a plan that seeks to maximize assistance for homeowners & use the authority of the Secretary to encourage the servicer's of the underlying mortgages, considering net present value to the taxpayer, to take advantage of the HOPE for Homeowners Program under section 257 of the National Housing Act & other available programs to minimize foreclosures. In add-on, the Treasury could use loan guarantees & credit improvements to facilitate loan modifications to prevent foreclosures.
Emergency Economic Stabilization Act of 2008, Pub. L. No. 110-343, at §109(a).
When Congress commissioned the Congressional Oversight Body, it particularly asked that the Congressional Oversight Body judge “the effectiveness of foreclosure mitigation efforts.” While the statute considers that foreclosure mitigation would be settled through the acquisition of mortgage-related assets, it's believed that Treasury has clear authority to use a portion of the $700 billion to address mortgage foreclosures in other ways. For Treasury to take no steps to use any of this money to alleviate the foreclosure situation, gives tongue to questions of whether Treasury has complied with Congress’s intention that Treasury create a plan to maximize assistance for homeowners. Id., at § 125(b)(1)(A)(iv). Id., at § 109 (a).
Strategy. the Congressional Oversight Body’s initial vexations about TARP only have become exacerbated by shifting accounts of its goals & tools used by Treasury. It isn't adequate to say the goal is the stabilization of American financial markets & the all-embracing economy. That destination is accepted. The question is how billions of dollars to an insurance multinational or a credit card company boosts both the goal of financial stability & the well-being of taxpayers, including home owners vulnerable to foreclosure. It would be positive for Treasury to clearly identify the types of organizations it feels fall subordinate to the reach of Emergency Economic Stabilization Act & which do not & the proper uses of TARP funds. The need for Treasury to address these rudimentary issues of strategy has only continued to raise more questions than answers.
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