In July 2007, then-Senator Barack Obama signed the Presidential Oath of Transparency, ensuring that, if elected, his administration would be "fully and robustly committed to open, transparent, and accountable government principles." Now that questions over the management of the TARP bailout money are being raised without adequate answers, it is time for the President-elect to commit his economics team to make good on this pledge.
The Oath signed by Obama states that effective management, accountability, transparency, and disclosure of taxpayer expended resources by federal agencies are of the utmost importance to maintain the trust of the American people. Given the magnitude of taxpayer dollars being spent, these principles are all the more critical for the success of the new administration.
Before Christmas, the Associate Press reported it had submitted a survey to the 21 banks that had received a portion of the $330 billion spent by the Treasury Department to help provide liquidity in the market. Every bank refused to report how they were spending the TARP money. Several banks even reported they weren't tracking where every dollar was going.
Given the spectacular government failures that led to the current economic malaise, how could the Treasury, Federal Reserve, and FDIC allow for such a colossal accountability oversight?
Now a largeâ€“perhaps gargantuan is a better wordâ€“stimulus package is being considered, but before more money is spent, the Obama's transition team should take proactive steps to increase transparency and accountability structures.
During the campaign, Obama talked about putting the government online for citizens to see. Part of should be to use the internet to post not just reports, but readily understandable charts the general public can understand showing them what their money is being spent on.
The Treasury should develop a standardized form for financial institutions or lower-level governments to report how they spent federal money. This will decrease processing costs and increase the ability for auditors to spot fraud. The information should also come to a central source, regardless of whether money came from the Treasury, Fed, or FDIC.
Furthermore, the government should post online separate figures for what it has committed to spend, what it has actually spent, how much debt it is insuring, and whether any of the money loaned out has been returned. Unfortunately no one really knows this information right now, so it will be a challenge to get the record straight from the outset.
The New York Times reported in December that the government had spent or committed at least $7.8 trillion. CNBC reported around the same time that it calculated $7.36 trillion had spent. An independent Reason Foundation survey put the expenditure total over $8.4 trillion. While accuracy matters, what's important to realize is that conflicting reports even exist. No one really knows for sure what we've spent.
And the government hasn't been much help. A GAO December report found that the Treasury has yet to establish a formal system to track how banks are using the TARP money or whether firms are following the requirements set for taking bailout money.
While Financial Stability Secretary Neel Kashkari, in charge of the bailout money, has since told told the House Financial Services Committee he is directing his staff to establish a formal monitoring program with banking regulators to track TARP dollars, one has to search under various rocks and bushes on the Fed and Treasury websites to find out what they have spent money on.
Even the data online doesn't tell the whole story. The Bloomberg News agency has been turned down multiple times in their FIOA request to find out where up to $2 trillion of Federal Reserve cash had been distributed. TARP money is a mere 8 percent of what the government has spent to "stabilize" the economyâ€“it all should be listed in an open book.
This lack of accountability should be unacceptable to the taxpayers who have had trillions spent in their name. Government transparency and accountability should not be considered a secondary priority or "the extra mile," but rather as essential components for the incoming administration's government.