Cracks in TARP Bailout Show Its Problems

Columnist Declan McCullagh Says Evidence Is Mounting That The Bailout Plan Approved By Congress Is Faltering

(CBS)  This column, Other People's Money, is written by CNET's Declan McCullagh. It appears each Wednesday on CBSNews.com.

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When government officials are handed sweeping power to bail out corporations, with few checks and balances and scant oversight, guess what happens?

That's right. The authority gets abused. A report released Tuesday by federal auditors previews problems with the bailout plan, which was rocketed through Congress at supersonic speeds two months ago with minimal hearings or debate.

The 72-page report from the Government Accountability Office describes how federal agencies are being less than diligent in making sure that bailout dollars don't go to enrich failed executives or reward Hank Paulson's friends on Wall Street.

Here are some findings from the auditors' report on the so-called TARP program: "Treasury has not yet set up policies and procedures to help ensure that (taxpayer dollars) are being used as intended... Treasury also has no policies and procedures in place for ensuring that the institutions are complying with these requirements or that they are using the capital investments in a manner that helps meet the purposes of the act... Treasury cannot effectively hold participating institutions accountable for how they use the capital injections or provide strong oversight of compliance with the requirements under the act."

That's anything but an endorsement of the Bush administration's Troubled Asset Relief Program, or TARP.

It's true that the Treasury Department has published regulations dealing with limits on executive salaries for companies that apply for TARP. This is a reasonable step.

Lacking, though, are details about how the federal agencies that are involved in TARP will monitor this. One agency claims it will rely on the recipient's board of directors to assess compliance. Another believes that Treasury should do it directly. Confusion abounds.

When millions of dollars are at stake, loopholes will be found and squeezed through. If President George W. Bush can declare "emergencies" relating to mundane topics like Northwest Airlines labor disputes and encryption exports, it's a bit of a mystery why his administration is moving less swiftly here.

No wonder Eric Thorson, the Treasury Department's inspector general, told the Washington Post that: "It's a mess. I don't think anyone understands right now how we're going to do proper oversight of this thing." (Thorson subsequently tried to explain away his unfortunate candor.)

The more we learn about TARP, the worse it looks. Elizabeth Warren, the head of a panel charged with overseeing the program, believes the government is lurching from one tactic to the next with little evidence of a coherent plan, according to an article in the New York Times.

There was supposed to be a special inspector general for TARP. Senator Max Baucus, a Montana Democrat, told his colleagues to vote for TARP because it would put an "inspector general on the ground, in New York, inside the firms that facilitate Treasury auctions, watching every dollar that comes and goes." But it turns out that Neil Barofsky's nomination is on hold because someone in the Senate has objected.

Even though the TARP law required an oversight report, the first deadline came and went without one. Even though Paulson told Congress one thing during the TARP votes, he turned around and did another. The TARP idea is becoming something of a joke, with an Ohio school districtdemanding a $100 million bailout too.

House Speaker Nancy Pelosi blames the Bush administration. She said in a statement on Tuesday: "The Treasury Department's implementation of the TARP is insufficiently transparent and is not accountable to American taxpayers... The Treasury Department failed to impose conditions on the use of government funds..."

This is misdirection. It's true that the Bush administration wanted the ability to write blank checks with scant oversight. But if Congress decided TARP was necessary (a dubious idea at best), it had the responsibility to mandate strict rules and halt Treasury's ability to dispense funds if it breaks them.

Expect to hear more about other loopholes in TARP in the next few months. Here's one: TARP includes no statutory dollar limit on how high executive salaries of TARP bailout recipients can be. Instead, it lets the Treasury come up with "appropriate standards." In addition, only the top five executives will have their golden parachutes limited; all the rest will remain untouched, even if their salaries and bonuses happen to be in the millions or tens of millions of dollars.

There's no real limit on who can receive TARP cash. It's supposed to be "financial institutions," but that term is loosely defined as: "any institution... established and regulated under the laws of the United States or any state... and having significant operations in the United States." That's not limited to banks, as Detroit executives have been arguing at great length.

The bipartisan enthusiasm for bailouts shows how the two major political parties have reshuffled themselves. We now have the Bailout Party and the No Bailout Party (populated by some conservatives and libertarians with help from the AFL-CIO and economic populists). Unfortunately, the wrong one holds power in Washington today.

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Declan McCullagh is the chief political correspondent for CNET. He previously was Wired's Washington bureau chief and a reporter for Time.com and Time magazine in Washington, D.C. He has taught journalism, public policy, and First Amendment law. He is an occasional programmer, avid analog and digital photographer, and lives in the San Francisco Bay area. His e-mail address is [e-mail]

[element51]

What amazes me is that no one seems to realize that the middle class has been under seige for the past 30 years. The financial elite have determined that the middle class needs to be put back in its place and they have done a most excellent job in achieving that goal. Anyone who believed what we were told about the bail out is a fool. There was never any "plan" to help the economy recover, only a plan to put more money in the wealthy overseas bank accounts. We were told that if we didn''t act at once the whole system would perish and we fell for it hook, line and sinker. So now the rich are richer and the rest of us can fend for ourselves. Blame Bush, blame Obama, blame congress or hell, blame Santa Clause. It really doesn''t matter. And the war goes on.

[steamed2]

Frankly, the only thing I''m amazed at regarding the so-called ''financial crisis'' is that taxpayers still haven''t organized a honest-to-god march on Congress. As a retired financial crimes investigator I can only laugh at the ''revelation'' that they failed to put any oversight in how the ''bailout'' money was being used! Paulson originally tried to have it written into the first version of the bailout law that his decisions for use of the money couldn''t be reviewed by any court of law or any administrative agency, and no one wondered why? The version that finally DID pass was just as devoid of any real oversight and now it''s clear Henry Paulson lied like a thief concerning both his intentions with the money AND what the banks would do with it once it was received, which is NOTHING! Just how apathetic and stupid is this country? What will it take to wake taxpayers up? Take a minute to check out http://www.peak.org/~LW584

[jt_lancer]

If there is ONE thing the government does a very good job of, it is pissing away taxpayer money.

[ioweign]

IOWEIGN, you lie as good as Obama does.

Posted by hitoyou11 at 06:59 AM : Dec 05, 2008


The inauguration is not 01.20.2009...

[hitoyou11]

IOWEIGN, you lie as good as Obama does.

[ioweign]

You seem so afraid of Mr. Obama that you forget he is not yet president.
The way he is on TV all the time you would think he was. Why don''''t you tell him he is "NOT THE PRESIDENT". Don''''t tell me, I know it.

Posted by hitoyou11 at 05:50 AM : Dec 05, 2008

Obama: Only one president at a time; will act on economy when inaugurated

By Nedra Pickler and Terence Hunt
The Associated Press


CHICAGO -- Even Barack Obama can''t change the calendar.

The president-elect said Friday he wanted to act urgently and deal "head on" with the nation''s economic crisis. But he recognized that his power was limited by the fact that George Bush will be running things until Jan. 20.

"The United States has only one government and one president at a time," Obama said at his first news conference since winning the presidency three days earlier.

[hitoyou11]

You seem so afraid of Mr. Obama that you forget he is not yet president.
The way he is on TV all the time you would think he was. Why don''t you tell him he is "NOT THE PRESIDENT". Don''t tell me, I know it.

[hitoyou11]

"Obama, the great LIE. That is all he is, and that is what all you fools that voted for him are going to get, A FOOL. A man made lie." Posted by hitoyou11

How is this relevant to the subject? Did Mr. Obama bring Paulson and Bernanke in front of Congress? Did Mr. Obama lobby from the White House?

You seem so afraid of Mr. Obama that you forget he is not yet president.
YES he lobby on TV just like he is now. Running off the mouth

[hitoyou11]

Cracks in TARP Bailout Show Its Problems: No kidding. Look at who is running it. This is not new, congress has done nothing right in years. One way are another they are running it. SO get over it, and it is "NOT" a
Republican, Democratic thing. "it is both" so get over it.

[brianbwb-2009]

"Congress handed over $700 billion of our money way too easily, that was too easy and maybe stupid too." Posted by spinproof

Well after WMDs in Iraq, and now the bailout, it would seem that Congress and the Senate would learn not to believe a word Bush says, especially when he uses the con artist trick of "hurry up, we got to do this real fast".

[brianbwb-2009]

"Obama, the great LIE. That is all he is, and that is what all you fools that voted for him are going to get, A FOOL. A man made lie." Posted by hitoyou11

How is this relevant to the subject? Did Mr. Obama bring Paulson and Bernanke in front of Congress? Did Mr. Obama lobby from the White House?

You seem so afraid of Mr. Obama that you forget he is not yet president.

[spinproof]

Congress handed over $700 billion of our money way too easily, that was too easy and maybe stupid too.

[hitoyou11]

Obama, the great LIE. That is all he is, and that is what all you fools that voted for him are going to get, A FOOL. A man made lie.

[hitoyou11]

Congress does very little right. The tax payer just lost 700 billion dollars. And we are going to lose 35 billion more to 3 car companies that are worth 0. All you fools must be happy. No one is that big. Let them go under, down, to HE))LL with the auto companies.

[Renegade.Rivers]

If the Democrats really cared about the American people, then would they not have set up the rules before they passed the bill? Seems to me the Demos were asleep at the wheel. If Bush hadn''t of passed it, oh well. At least the rules for playing the game would have been known had Congress set them, and that is what they should have done. Don''t go blaming Bush and Co. for the mistakes the Demos, made.

They should know full well that any word out of a politicians mouth was a lie.

Oh I forgot, they are politicians. The believe their own lies. Why not other politicians too, right?

[antoniof123]

This is the worst Administration in American history none not even Nixon, Carter, Johnson (civil war era) were worst.

Never in histry has one group destroyed so much of a country.

I hope you neo cons shills are happy.

One good thing will come out of this you will never see power again in your lifetime that is for certain.

[docpeter1953]

There she is again, the lady troll posing as lady_organs.

In case the rest of you don''t realize it, lady_organs is aka gop_will_win, gophockeymom, gop_4ever, paidgopschill, plus other names. You all need to learn how to recognize a troll by their footprints in the mud before crossing the bridge.

[docpeter1953]

No Banker Left Behind...

Posted by habu99 at 01:31 PM : Dec 04, 2008
______________

Surely would have more success than ''no child left behind''

[habu99-2009]

No Banker Left Behind...

[walt1944-2009]

As expected, it has been learned that "oversight" of the $700 "ENRICHMENT PACKAGE" passed in September is non-existant.

If anyone can count on anything in the Bush II government, it is that there will be ABSOLUTELY NO accountability, even when they say there is!

And with Great-Emperor-elect Obama keeping on some "Bushies" in his cabinet and starting to "waffle" on campaign promises, there is the unsettling feeling it will be "more of the same" under Obama as it was under Bush II.

And we all thought if we elected John McBush McCain, we would get a 3rd term of Great Emperor Bush II!!!!

SIG HEIL, I''LL GET MY 3RD TERM YET!!!, BUSH!!!
SIG HEIL, I''M "RETHINKING" THE WORD "OVERSIGHT"!!!, OBAMA!!!