By Paul C. Light
Special to The Washington Post
Tuesday, December 9, 2008
Americans who wondered whether Congress was serious about independent oversight of the federal government's $700 billion bailout finally got an answer yesterday, when the Senate confirmed a New York prosecutor as watchdog of the costly rescue program for the nation's financial sector.
Neil M. Barofsky will become a special inspector general within the Treasury Department to audit and investigate spending by the Troubled Asset Relief Program.
The special IG is the sole executive branch officer with the power to oversee the potential conflicts of interest and miscalculations in the program. Armed with a $50 million budget and dual-reporting responsibility to Congress and the president, the special IG has the independence to audit and investigate every transaction and subpoena every record associated with the rapidly changing program.
And yet it took two months from the time the Treasury Department started spending the $700 billion before the special IG's job was filled.
The Bush administration acted immediately to appoint the rest of the bailout team, but it waited six weeks to nominate Barofsky as special inspector general. Then, his confirmation was held up anonymously by one senator. The opposition was finally lifted last week.
The delay indicated a continued ambivalence toward inspectors general. The first inspector general's office was created in 1975 to consolidate auditing and investigatory responsibilities at the old Department of Health, Education and Welfare. Over the years, the IG concept proliferated to 36 departments and agencies. Treasury joined the list in 1988.
Under the Inspector General Act, IGs are presidential appointees who are subject to Senate confirmation but serve at the pleasure of the president. As a result, they are sometimes selected more for their political loyalty than their expertise. As the Project on Government Oversight argues, many inspectors general feel enormous political pressure to support the administration that appointed them. As one former inspector general once told me, being an IG is like straddling a barbed-wire fence between Congress and the president.
Barofsky is not an expert on either the bailout or being an inspector general. Nonetheless, he seems to relish the opportunity to follow the dollars wherever they might lead. As an assistant U.S. attorney in Manhattan, he has eight years of experience investigating corporate fraud and narcotics trafficking, and he helped put two Refco executives in jail after the trading firm collapsed in 2005.
Now that the Senate has acted, his job will be to build an office from scratch, hire roughly 200 auditors and investigators and move quickly to monitor the bailout. Once in place, he will almost certainly stay for several years. The post does not appear to be on the Obama transitions replacement list.
In a harbinger of what may be many hurdles to come for other Obama appointees, however, Barofsky's confirmation was delayed until last Friday because of the secret hold placed by an unnamed Republican senator. Under the original bailout bill, the special inspector general was to be responsible for overseeing the purchase of toxic debt. Once Treasury abandoned the toxic-debt strategy in favor of direct injections of funds into the banking industry, the inspector general's job became more uncertain.
This concern could be easily addressed through legislation drafted by Sen. Claire McCaskill (D-Mo.), an indefatigable defender of IG independence. Her bill simply states that the special IG has authority to inspect "any action" undertaken with the bailout money. McCaskill and her co-sponsors believe the special inspector general's job is not just to ferret out fraud, waste and abuse in contracts for services.
And the sooner he gets going, the better. "Half the money is gone," Senate Finance Committee Chairman Max Baucus (D-Mont.) told Barofsky in his Senate Finance Committee hearing Nov. 17. "And it is way past the time when you should have been on the job overseeing the program. I hope you will be on the job by the end of this week."
Even as Barofsky readies himself to be sworn in, Congress still needs to act on McCaskill's bill. If it fails to act, Barofsky will labor under an uncertain mandate. He will also work without a net. The Senate could give him added independence with a seven-year term and removal only for cause. It is an idea that came up earlier this year when Congress elevated IGs to the undersecretary level, and it deserves another look for Barofsky and the rest of the Senate-confirmed IGs.
Paul C. Light is a professor at New York University's Robert F. Wagner School of Public Service and author of "A Government Ill Executed." He is writing an occasional column on the presidential transition for The Washington Post.