TARP Yields Positive Results, Transparency Issues Linger

By Alexa Gitler - Talk Radio News Service

After the Troubled Asset Relief Program (TARP) issued its seventh quarterly report to Congress Wednesday, Special Inspector General of TARP Neil Barofsky and Elizabeth Warren, Chair of the Congressional Oversight Panel, said that, although the program has yielded some positive results, there are still lingering concerns. 

“This quarter has definitively demonstrated that proactive law enforcement efforts can play a vital role in protecting taxpayers’ interests,” Barofsky said.

However the key issue that the committee wanted to focus on was the necessity for transparency and accountability, especially when addressing the challenges still facing the financial system and the economy.

“Under the TARP program, the Treasury put money into 707 banks, fewer than 10% of the small banks have managed to repay their TARP obligations, their problems are substantial,” Warren said. “Small banks face serious difficulties with the coming wave of commercial real estate loans and [they] do not have the same access to the capital that larger banks have.”

Barofsky said the lack of transparency being shown by the Department of Treasury is another issue that is concerning.

“I think that transparency is not for transparency sake, it makes the programs better and it makes them more credible,” he said. “By not documenting conversations or having formal negotiations it hurts the credibility of its programs in ways that are entirely unnecessary.” 

Warren and Barofsky agreed that, under the TARP program, numerous strides at re-stabilizing the U.S. economy have yielded extremely positive results and in the future, hopefully with some realignment and accountability, the economy will be back on track. 

Treasury Should Mandate Mortgage Modifications, Says TARP Watchdog

The man in charge of monitoring the Troubled Assets Relief Program (TARP) told members of the Senate Finance Committee Tuesday that the Obama administration should consider forcing lenders to reduce payments for homeowners behind on their mortgages.

Neil Barofsky, the Special Inspector General of TARP, a $700 billion financial rescue program designed to help cushion the blow of the recent housing collapse, said that foreclosures have increased since the current administration announced measures last year to straighten out the housing market.

According to Barofsky, the Treasury Department's Home Affordable Modification Program (HAMP), a voluntary $75 billion foreclosure-prevention policy which gives payments to lenders who agree to reduce the principal on homeowners' loans, “has made very little progress in stemming this onslaught."

In a report put out Tuesday morning, Barofsky wrote that the Treasury Department could do more for borrowers by making the program mandatory.

"Giving servicers the discretion to implement principal reduction introduces a questionable inconsistency into the HAMP program and stands in stark contrast to the mandatory nature of the other significant mortgage modification triggers."

Who is responsible for TARP oversight?

The House Ways and Means Committee met today to discuss oversight of the Troubled Asset Relief Program (TARP), a program which altogether will commit almost 3 trillion dollars in assistance to failing private companies. The lack of oversight of this program has become apparent with recent bonuses paid to executives of large corporations such as AIG. Two witnesses testified: Neil Barofsky, Special Inspector General of the Troubled Asset Relief Program (SIGTARP), and Gene Dodaro, Acting Comptroller General of the U.S. Government Accountability Office. Three officers from the Treasury were invited, but were not in attendance.

In his opening remarks, Congressman Reichert (R-WA) summarized TARP’s problematic nature, “There is no clear plan and no consistent application of the program. Those involved have no idea if, how, or when TARP will change... or change again.... The complete lack of transparency in TARP has produced a credibility crisis that undermines the very confidence it was meant to restore.” Reichert went on to outline two points which must be clarified in order to restore confidence in TARP: “(1) exactly how TARP money is being spent and (2) what specific metrics Treasury will use to measure the effectiveness of the program.”

Barofsky explained the responsibilities of SIGTARP, “To oversee this vast amount of money for the American taxpayer, I focus on three different areas: transparency, oversight, and enforcement.” In December, he requested that the Treasury put all TARP agreements on its website; the top 20 agreements were finally posted by the Treasury this morning. SIGTARP is the only oversight body which has the authority for criminal law enforcement. Of this responsibility, Barofsky stated, “This is one of our most important functions and we are meeting this unprecedented challenge head-on... When we detect fraud, rest assured, we will investigate the matter and bring any fraudster to justice.”

Dodaro presented the results to the Committee of both 60 day reports which the Government Accountability Office has produced since TARP’s inception. Each report gave recommendations to the Treasury, Dodaro explained. “First, monitoring and tracking the use of the money and making sure Treasury had an oversight process in place to monitor compliance with the legislative provisions... We believe you ought to have data collected on a monthly basis for any institution receiving Troubled Asset Relief Programs. And they’re beginning to now, recently, move in that direction.”

When asked if their agencies have the resources necessary to be effective, Barofsky responded, “We’re building. We don’t have the necessary resources yet. Pending right now in the House is HR 1341 which would give us some expanded hiring authority which will help us... We’ve had some serious challenges.”

Congressman Pascrell (D-NJ) expressed frustration with the Treasury Department. “I am deeply disappointed that the Treasury Secretary right now, Mr. Geithner, has not taken a more aggressive approach to remedy the mismanagement of these TARP funds by the last administration. And I’m stunned by the current Treasury and I’m offended by their obstinacy and the fact that they’re not here today, when they were requested to be here three times.”

Barofsky announced a plan to audit the Treasury to find out precisely “who knew what when and why” regarding AIG’s use of TARP funds. As of this morning, neither Barofsky nor Dodaro could say whom, if anyone, in the Treasury was aware of AIG’s misuse of this money.