By Zachary A. Goldfarb
Washington Post Staff Writer
Friday, January 23, 2009
The Treasury Department's top watchdog for the financial bailout says it's practically impossible at the moment to tell where all the money has gone and is preparing to ask every bank and company that's received a dollar from the $700 billion financial rescue to detail how the funds were used.
Once he makes the request, Neil M. Barofsky said the firms would have 30 days to comply. He could attempt to subpoena the information if he is not satisfied with how the firms respond.
"If the American taxpayer is to be expected to fund this extraordinary effort to stabilize the financial system, it is not unreasonable that the public and its representatives in Congress have some understanding as to how those funds have been used by the recipients," Barofsky said yesterday in a letter to Sen. Charles E. Grassley (Iowa), the ranking Republican on the Finance Committee.
Barofsky, the special inspector general for the Troubled Assets Relief Program, said he would ask the more than 300 firms to provide "a narrative response outlining their use or expected use of TARP funds" and supporting documentation. He said he would also request the firms to supply their plans for complying with restrictions on executive compensation restrictions that come with the taxpayer dollars.
"What remains almost entirely opaque . . . is what has been done with TARP money by the recipients of Treasury's investments and what the recipients' plans are for addressing executive compensation requirements," he wrote.
The Treasury has committed more than half of the $700 billion that Congress has allocated to the financial rescue. Lawmakers and others who have been tracking the rescue have been critical of the program, saying banks have hoarded taxpayer money to cover losses instead of lending it out to spur economic activity.
Most firms have been required to report their use of taxpayer funds. Subsequent investments in Bank of America and Citigroup required the banks to track the use of that money.
Banking regulators issued a statement last year expressing the expectation that banks would document how they are meeting the demand for loans to credit-worthy borrowers. Since then, several banks have given limited information about what they are doing with the investments. The firms have not provided detailed narratives.
Earlier this month, the Federal Deposit Insurance Corp. sent a letter to banks it regulates asking them to "implement a process to document how these funds were used."