The head of a congressional panel tasked with overseeing the $700 billion in taxpayer funds used to reinvigorate the financial sector said Tuesday that the Treasury Department isn't doing enough to explain how it is using the funds.
Elizabeth Warren, the chairwoman of the Congressional Oversight Panel established by the legislation authorizing the financial funds, told the Senate Finance Committee that the Treasury needs to be more forthcoming about its intentions.
Without a clearer explanation from Treasury about its overall plan for each capital infusion, and without transparency and accountability for how that plan was carried out, it is not possible to exercise meaningful oversight over Treasury's actions, she said.
She added, Congress has given Treasury substantial discretion, as befits this fast-moving crisis. But that discretion carries with it an equivalent obligation to explain, in real time, why the discretion is exercised as it is.
Both Congress and the American people, Warren said, need to understand the Treasury's view of the problems facing the financial sector, its comprehensive strategy to address the problems and the methods the department will use to measure success.
Our collective financial security is on the line and we all have a stake in the outcome, she said.
Warren also said the panel had been frustrated in its efforts to oversee another aspect of the financial rescue package, the Term Asset-Backed Loan Facility or TALF, which the Treasury has said it intends to use to help purchase toxic assets to get them off of the balance sheets of troubled financial institutions.
The Treasury plan involves matching taxpayer dollars with private investments and providing loan guarantees from the Federal Reserve to leverage the funds into an auction for the toxic securities, but the oversight panel is seeking more information about why the Treasury decided to proceed in that route.
We have not received answers to this inquiry, but have been told we can expect a response tomorrow, Warren said. Until we receive detailed and accurate information, the panel cannot perform its oversight function.
She added, Moreover, it is difficult for Congress and the American people to have confidence in an initiative for which so much money is at stake and so little key information is available.
The panel is facing similar lack of information problems from the Treasury and the Fed in its investigation of the government intervention at American International Group (AIG), Warren said.
The panel has requested information from Treasury and the Fed on a number of points related to AIG, including how the assistance was requested and need was analyzed, the assessment of risk to the national and international financial system, any conditions placed on the assistance and information about counterparties and credit default swaps, she said. We await the requested information from Treasury.
She added, It is not surprising that Congressional and public outrage have been stoked on issues such as bonuses for AIG executives when there is no information or basic explanation as to why substantial taxpayer-funded assistance is necessary and what that money is accomplishing.
Gene Dodaro, the acting comptroller general in the Government Accountability Office, who also spoke at the hearing, noted another problem facing his organization in overseeing the stimulus funds.
Another TARP access issue for GAO involves the growing role of the Federal Reserve, he said. GAO has the authority to oversee the activities of Treasury, but not the Federal Reserve, because the Banking Agency Audit Act specifically precludes us from auditing the Federal Reserve's monetary policy and discount window operations.
He added, We would fully support legislation to provide GAO with audit authority over those activities, together with appropriate access, recognizing the sensitivity of this area and the need for careful drafting.
The oversight panel, which is also tasked with overseeing the government's response to the mortgage crises that sparked the financial meltdown, noted that President Barack Obama's recently announced housing plan had addressed a number of concerns the panel had on housing responses.
The administration plan could assist 4 million to 5 million homeowners avoid foreclosure, Warren said, but she noted that it still had some shortcomings.
In particular, the plan does not include a safe harbor for servicers operating under pooling and servicing agreements to address the potential litigation risk that may be an impediment to voluntary modifications, she said. It is also important that the plan more directly address second mortgages lest they otherwise continue to contribute substantially to the rise in foreclosures.
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