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Paulson's private party

Bailout funds can't be tracked, so why hand out more?

Rocky Mountain News

Published December 28, 2008 at 8:48 p.m.

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Perhaps the most comforting financial news we've seen in recent days are reports that the Bush administration isn't likely to ask Congress for the final "tranche" of funding from the government's $700 billion Troubled Assets Relief Program.

Outgoing Treasury Secretary Henry Paulson shouldn't get the money anyway. There's little way of knowing how much support, if any, the initial $350 billion from TARP has provided to the wobbly economy because we know almost nothing about how the funding has been used. Last week, The Associated Press uncovered an absolute vacuum in transparency and oversight of the bailout that's gone to financial institutions. And until a lot more light shines on these transactions, Congress shouldn't hand out another dime - if then.

The AP contacted 21 banks that each received at least $1 billion in TARP money and asked how they spent it and what they planned to do with the funding going forward. None of the banks provided any specific answers - a few offered PR boilerplate, along the lines of "we're strengthening our balance sheets and making more loans" - and several simply gave reporters a brush-off.

Turns out that there's no disclosure process forcing banks to inform the public how they're spending TARP funds. The Government Accountability Office reported earlier this month that - despite assurances from Paulson and the congressional negotiators who wrote the TARP legislation in the fall - the bill did "not require that the institutions track or report how they plan to use, or do use, their capital investments."

The only way Congress can require any sort of accountability from bank officials is essentially by humiliating them - compelling them to testify before a congressional hearing set to take place soon after lawmakers go back to work in January.

We supported the bailout initially because we were persuaded that unless the Treasury received unprecedented powers to purchase a staggering amount of bad debt, a meltdown of the global financial system could result.

But we also did so after hearing assurances from both the White House and Democratic congressional leaders that significant oversight and transparency would accompany those powers.

Now we've learned that the promised accountability never materialized.

When the history of this economic downturn is written, we may learn that TARP barely stanched the financial hemorrhaging. It's possible that coordinated moves by the Federal Reserve and central banks in other nations - which poured jaw-dropping amounts of cash and other liquidity into the markets, and guaranteed short-term corporate debt - actually kept the wheels of global commerce turning.

Democratic congressional leaders say they'll put together a massive new stimulus package that will be ready for President-elect Barack Obama to sign soon after he's sworn in - legislation that could easily surpass TARP's $700 billion price tag.

If Congress insists on further economic interventions, it might as well pull the plug on TARP before any additional funds are released. Should financial institutions need additional help in 2009, do so using new legislation spelling out how recipients will account for the subsidies they receive. No more blank checks.

Comments

  • December 29, 2008

    7:01 a.m.

    Suggest removal

    taoistblockhead writes:

    http://www.truthdig.com/report/item/2...

    The corporate forces that are looting the Treasury and have plunged us into a depression will not be contained by the two main political parties. The Democratic and Republican parties have become little more than squalid clubs of privilege and wealth, whores to money and corporate interests, hostage to a massive arms industry, and so adept at deception and self-delusion they no longer know truth from lies. We will find our way out of this mess by embracing an uncompromising democratic socialism—one that will insist on massive government relief and work programs, the nationalization of electricity and gas companies, a universal, not-for-profit government health care program, the outlawing of hedge funds, a radical reduction of our bloated military budget and an end to imperial wars—or we will continue to be fleeced and impoverished by our bankrupt elite and shackled and chained by our surveillance state.

    The free market and globalization, promised as the route to worldwide prosperity, have been exposed as a con game. But this does not mean our corporate masters will disappear. Totalitarianism, as George Orwell pointed out, is not so much an age of faith as an age of schizophrenia. “A society becomes totalitarian when its structure becomes flagrantly artificial,” Orwell wrote, “that is when its ruling class has lost its function but succeeds in clinging to power by force or fraud.” Force and fraud are all they have left. They will use both.

  • December 29, 2008

    9:13 a.m.

    Suggest removal

    irisman writes:

    The banks know what happened to the money they received. It's practically impossible to receive large sums of money and redistribute it without knowing where it all went. Even crime syndicates have accountants. Congress should subpoena the executives of all the banks that received bailout funds, and subject them to serious grilling. If that doesn't work, maybe they need to recall Donald Rumsfeld from retirement to do some consulting on enhanced interrogation.

  • December 29, 2008

    9:31 a.m.

    Suggest removal

    Spencer writes:

    This is a travesty. I don't care if you are an R or a D the fact that these financial institutions can spend this money without any disclosure should be considered a tragedy.

  • December 29, 2008

    10:25 a.m.

    Suggest removal

    HopiMedicineMan writes:

    It all comes back to Einstein Bush.
    He didn’t think about accountability, no minor thing.
    PLEASE, NO MORE NEPOTISM IN GOVERNMENT.
    IQ falloff between generations is a reality.