Remember that $700 billion Congress shelled out for banks last October? We called it TARP. Right, well, also recall also that the money was designed to be loans to banks? (Actually it was designed to buy toxic assets, though Paulson secretly wanted to use it for capital infusions and eventually did.) And not only that, but you might also remember all the claims that the government would make money on TARP. (And just last month Barney Frank was trying to argue, and still will after the recess, that TARP is making money and we should start using those proceeds to fund low-come housing—the same policy that generated the housing bubble). Well, there is a problem.
To begin with, the program is not making money yet, despite some claims. There have been millions in dividend payments, but hundreds of billions are still on the line and may never return consider the state of some banks. But there is a larger issue: tracking the money. And it’s a funny thing, but if you can’t track where money has been loaned out, its hard to get it all back or know how effective it really was. From FinReg21:
Although hundreds of well-trained eyes are watching over the $700 billion that Congress last year decided to spend bailing out the nation’s financial sector, it’s still difficult to answer some of the most basic questions about where the money went.
Despite a new oversight panel, a new special inspector general, the existing Government Accountability Office and eight other inspectors general, those charged with minding the store say they don’t have all the weapons they need. Ten months into the Troubled Asset Relief Program, some members of Congress say that some oversight of bailout dollars has been so lacking that it’s essentially worthless.
“TARP has become a program in which taxpayers are not being told what most of the TARP recipients are doing with their money, have still not been told how much their substantial investments are worth, and will not be told the full details of how their money is being invested,” a special inspector general over the program reported last month. The “very credibility” of the program is at stake, it said.
In keeping with the trend of looking backward in this blog post, remember that back in July 2007, then-Senator Obama pledged his commitment to “open, transparent, and accountable government principles” when he signed Reason’s Oath of Presidential Transparency. From the stimulus to TARP, transparency has been lacking. But this level of failure makes it seem like the administration just isn’t trying.