(Recasts with details from GAO report, adds Treasury, lawmaker
By Richard Cowan and Rachelle Younglai
WASHINGTON Dec 2 The investigative arm of the
U.S. Congress on Tuesday criticized the Treasury Department's
handling of a $700 billion bank bailout program and urged the Bush
administration to get it into better shape.
Treasury has yet to address a number critical issues,
including how it will ensure that the program "is achieving its
intended goals," said Congress' Government Accountability Office
(GAO) in a study first reported by Reuters.
Under the government's Troubled Asset Relief Program (TARP),
$250 billion has been committed for direct injections into U.S.
banks in a bid to revive sluggish credit markets and restore
confidence in the banking system.
Some lawmakers have accused banks of hoarding the money,
instead of lending it out, and have urged Treasury to make it
clear that government funds must be used for loans and not to buy
healthy banks or pay higher dividends.
The GAO said Treasury has not yet determined if it will impose
reporting requirements on participating banks so that the
government can monitor how federal funds are being used.
"The standard agreement between Treasury and the participating
institutions does not require that these institutions track or
report how they plan to use, or do use, their capital
investments," the GAO said.
The congressional watchdog recommended Treasury develop ways
to ensure participating banks comply with key TARP conditions,
such as limits on executive compensation.
It also urged Treasury to report in a timely manner on whether
financial institutions are fulfilling the bailout's goals, and to
ensure accountability and transparency.
Treasury agreed with the bulk of the GAO's recommendations,
but said it had a "different perspective" with what is needed to
evaluate how participating banks are spending their government
Many banks, including Bank of America (BAC.N), have already
received government funds and have assured Congress that they
intend to lend the money out to credit-worthy borrowers.
The GAO also said oversight and enforcement of the program's
executive pay provisions are still unclear. The TARP limits
executive pay for participating banks, including restrictions on
golden parachutes for departing executives.
The GAO said credit market improvement could not be solely
attributed to the government's capital injection program because
so many different actions are being taken.
"No single indicator will provide a definite determination of
the program's impact," the document said. The GAO said its
preliminary indicators of success for the program will include
trends in interest rate spreads, mortgage rates, mortgage
originations and foreclosures.
In related news, Montana Democratic Sen. Max Baucus, chairman
of the Finance Committee, in a statement urged the Senate to
confirm the Bush administration's nominee for inspector general of
the TARP so he can get to work.
Baucus said the GAO report underlined how important it is for
nominee Neil Barofsky to start his job and set up his staff of
internal TARP watchdogs. His nomination is being blocked by a
single, unnamed Republican senator.
"This report proves the immediate need for oversight of the
taxpayer dollars being expended right now as part of TARP.
Because of one Senator's anonymous block on this nomination, three
weeks have been lost, a key element of the TARP oversight program
is not in place," Baucus said.
"It makes no sense to block the appointment of the special
inspector general. The Senate must act quickly to confirm the
special IG next week."
(Additional reporting by Kevin Drawbaugh; Editing by Phil