Congressional Oversight Panel Questions Bailout's Efficacy
Wednesday, December 10, 2008
The congressional panel overseeing the $700 billion economic rescue plan wants to know what banks have done with their allotments, whether the public is getting a fair return on those investments and what the Treasury Department is doing to help American families.
Ten questions, some of them implicitly criticizing the program, form the first report of the Congressional Oversight Panel for Economic Stabilization, which is expected to be released today.
"These are the tough questions that people all over the country are asking," said Elizabeth Warren, chairman of the panel and a law professor at Harvard University. "We are issuing the official report asking those same questions. They are tough. This is $700 billion we are talking about. I ask tough questions when I buy a car."
Congressional Democrats have repeatedly complained that the Treasury's Troubled Assets Relief Program addresses the needs of financial institutions but ignores the anxieties of ordinary Americans.
The largest piece of the program invests government money into banks at favorable interest rates.
The Treasury has considered plans to aid homeowners struggling with mortgage payments but has not adopted one.
The Congressional Oversight Panel, which was created along with the rescue program, consists of three Democratic appointees and one Republican.
The lone Republican, Rep. Jeb Hensarling (Tex.), did not sign the panel's first report, though it consists only of questions.
"I have to ensure that every panel member has the resources and rights necessary to conduct effective oversight," he said in a statement. "I must also ensure that the panel adopts a serious agenda that truly brings transparency and accountability to the process. . . . Until I conclude that these important issues are addressed, and that all taxpayers can be sure that their voices are represented, I cannot in good conscience approve any reports."
The questions in the report address basic issues, such as what Treasury officials believe is the root cause of the financial crisis, what the Treasury wants to achieve with the program and whether the program is stabilizing markets.
Other questions emphasize the fact that banks have been the major beneficiary of the program, while other groups have been left empty-handed.
For example, the report highlights the fact that while Congress told carmakers they would have to reform before they get federal aid, the Treasury did not require banks to present a viable business plan or to replace "failed" executives in order to receive money.
Likewise, it asks what steps the Treasury has taken to reduce foreclosures, and said the Treasury has an obligation to explain its reluctance to adopt a mortgage relief plan proposed by the Federal Deposit Insurance Corp.
"Why has Treasury not generally required financial institutions to engage in specific mortgage foreclosure mitigation plans as a condition of taxpayer funds?" the panel asked.
Staff writer Amit R. Paley contributed to this report.