The Senate Finance Committee examined the progress of the Troubled Asset Relief Program in a hearing on Tuesday, with the results of the first six months of the $700 billion financial bailout determined to have been unsteady and raising concerns about whether or not the funds are being used in the best possible manner.
The program puts taxpayers at risk for $2.9 trillion, the Special Inspector General for the TARP Neil Barofsky said at the hearing.
Committee Chairman Senator Max Baucus, D-Mont., noted that $2.9 trillion is like having a second United States Government budget, dedicated solely to saving the financial system.
Because the majority of the $700 billion has already been committed, Baucus called for a focus on oversight to ensure that the funds are spent wisely, especially in the wake of the American International Group Inc. (AIG) bonus crisis.
Barofsky pledged in his testimony that his office is examining the AIG bonus payments, estimated at $165 million.
We will be looking closely to ensure that the bonuses to AIG employees are not inconsistent with AIG's legal or contractual obligations, Barofsky said.
The findings of his office will be delivered to Congress, including the sequence of events leading up to the approval of the retention bonuses.
I too am frustrated with these very substantial bonuses given at a time when AIG would have by now been in bankruptcy proceedings but for huge, repeated infusions of government money, Barofsky said.
The AIG fiasco is just the tip of the iceberg, Baucus said. There are many, many tough oversight issues connected with this new program.
At the hearing, witnesses are expected to testify on the 12 areas for use of the TARP, including the capital investment program for large banks, the capital investment program for small banks, Citigroup, Bank of America, AIG, the Term Asset-Backed Securities Loan Facility, or TALF, G.M., G.M.A.C., Chrysler, the mortgage relief program, the small business program, and the bad assets program announced last week.
Barofsky expressed his frustration over the rapid commitment of the TARP funds. According to a report from the Government Accountability Office released Tuesday, there is only $109.6 billion left from the original $700 billion of TARP funds, putting the spending at an average of $100 billion a month since the launch of the program.
This flood of cash will inevitably attract those seeking to profit criminally, Barofsky warned in his testimony.
If, by percentage terms, some of the estimates of fraud in recent government programs apply to the TARP programs, we are looking at the potential exposure of hundreds of billions of dollars in taxpayer money lost to fraud, he said.
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