Treasury Must Divulge Details on Bailout, Panel Says
Friday, January 9, 2009
The congressional panel overseeing the administration's financial rescue program plans to release a report today repeating questions it first posed to the Treasury Department in mid-December and harshly criticizing it for failing to provide satisfactory answers.
The report says the department has not articulated a plan for restoring lending to consumers. It asks again why the Treasury has refused to spend any money on foreclosure prevention programs. And it says the department is sowing confusion in the financial markets, undermining the stated purpose of the rescue program, by failing to require companies to report how they are spending federal investments of taxpayer dollars.
"So long as investors and consumers are uncertain about how taxpayer funds are being used, they question both the health and the sound management of all financial institutions," wrote the five-member panel, which is headed by Elizabeth Warren, a law professor at Harvard University.
The roughly 50-page report calls on the Treasury to establish measuring sticks that can be used by the public to assess the program's success. It says banks that get federal money should be required to detail how it is spent.
At present, "it is unclear how any conclusions can be drawn about the program's effectiveness," the paper says.
The first report consisted of 10 questions. The Treasury responded with point-by-point answers. This report is a point-by-point critique. Details were published on the Web site of the American Banker, a trade publication.
The sharpest words are on foreclosure prevention. The report says the Treasury has made no effort to use rescue funds for this purpose.
Noting that Citigroup was required to modify mortgage loans as a condition of its federal bailout, the report questions why the department has not imposed a similar requirement on other recipients of federal money, and it says that's one more question the Treasury won't answer.
"Treasury's refusal to answer this question," the report says," is one of the most troubling aspects" of the department's latest responses.