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Feds Launch 20 Probes of Alleged TARP Abuse
The office of the Treasury Department charged with oversight of the Troubled Asset Relief Program (TARP) has initiated more than 20 preliminary and full criminal investigations, according to a report submitted to Congress today. That seems to be a very high number for a program that has only been around for six months.
The report, written by TARP’s Special Inspector General’s office (SIGTARP), spotlighted six different categories of fraudulent and potential criminal activity: large corporate and securities fraud matters affecting TARP investments; tax matters; insider trading; public corruption; and mortgage-modification fraud.
Six different audits have been started by SIGTARP, including: how TARP recipients are using the funds received under the program, how TARP recipients are implementing executive compensation controls, the criteria used by the Treasury Department in determining the first round of TARP recipients, how external companies and individuals are influencing TARP officials and bank regulators, the bonuses paid to AIG executives, and counterparty payments made by AIG.
Now, in any 250-page report covering a $3 trillion program, there are bound to be head-scratching comments and sections. But I found this disconnect between the Treasury Department and SIGTARP to be one of the most interesting:
Treasury has indicated, however, that it will not adopt SIGTARP’s recommendation that all TARP recipients be required to do the following: account for the use of TARP funds, set up internal controls to comply with such accounting, and report periodically to Treasury on the results, with appropriate sworn certifications.
In light of the fact that the American taxpayer has been asked to fund this extraordinary effort to stabilize the financial system, it is not unreasonable that the public be told how those funds have been used by TARP recipients. Treasury is now conducting regular surveys of the banks’ lending activities; however, with the exception of Citigroup and Bank of America, Treasury has refused to seek further details on TARP recipients’ use of funds.
As a result, in late January, SIGTARP decided to undertake, itself, a use of funds project by conducting a survey of 364 TARP recipients that had received funds as of January 31, 2009. Included in that survey was a request for a description of what the recipients actually did or plan to do with the TARP funds.
Although the results of the survey still need to be analyzed, one thing is clear: Treasury’s arguments that such an accounting was impractical, impossible, or a waste of time because of the inherent fungibility of money were unfounded. Banks generally provided a reasonable level of detail regarding their use of TARP funds, and, while the response quality was not uniform, some banks were able to provide detailed, at times even granular, descriptions of how they used taxpayer money.
Seems reasonable, doesn’t it. And why are Citi and BofA exempt from questions regarding their lending activities? Shouldn’t it be the other way around? Isn’t this kind of like saying that we won’t ask North Korea about its nuclear weapons program?
A copy of the report is available here via the New York Times.
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