The Washington Independent
The Washington Independent

No TARP Oversight? Tell It to the Senate

Alberto Thompson
News
Last updated: Jul 31, 2020 | Mar 09, 2009

Rep. Dennis Kucinich (D-Ohio) has some questions this week about how far the Obama administration is going to ensure that Wall Street banks are spending bailout funds as Congress intended.

In a memo (pdf) issued today, Kucinich, who chairs the House Oversight and Government Reform Committee’s domestic policy subpanel, goes after the Treasury Department for allowing some of the largest bailed out banks to process what the congressman calls “questionable transactions.”

Kucinich cites an $8 billion loan to “public sector entities” in Dubai from Citigroup, which has received $25 billion in funds under the Troubled Asset Relief Program; a $7 billion investment in China Construction Bank Corporation by Bank of America, another $25 billion recipient of TARP funds; and a $1 billion venture by J.P. Morgan, yet another $25 billion TARP beneficiary, into India’s finance industry.

Such moves, Kucinich argues, are part of the larger problem that Treasury has failed to monitor TARP funds “to prevent their use for perks for company management, loans to foreign governmental authorities, investments in outsourcing jobs held by Americans, investments in foreign company operations overseas, and the repurchase of company common stock, or any other potential example of waste and abuse.”

Under existing agreements between Treasury and TARP recipient financial institutions, Treasury has broad contractual authority to scour company books in search of, among other things, waste and abuse by TARP recipients. But in practice, Treasury is not doing so. In the absence of statutory or regulatory definitions of waste and abuse or explicit conditions for use of TARP funds – either promulgated in term agreements by Treasury under its broad authority, or prescribed by Congress in EESA – Treasury’s oversight will not find them and cannot enforce them.

In pointing out the absence of statute, Kucinich might have found the cause of his own concerns. That is, the Treasury might be bound to prevent TARP “waste and abuse,” but it has no authority to tell the banks where to spend their bailout money. The original TARP bill, remember, was purposefully weak on this front because policymakers — heeding the Bush administration — said they didn’t want to micromanage the affairs of the industry. Similarly, efforts to rein in executive compensation were dropped because of concerns that the restrictions would scare away industry “talent.”

As we’ve written before, lawmakers who assumed that the banks would use the extra capital to thaw the frozen domestic credit markets are learning the hard way that banks exist to make money, not to perform heroic deeds. They aren’t altruists, or patriots, or environmentalists, or humanitarians. They’re businesses, and they’ll do whatever they think will yield the greatest profits for shareholders. If that means overseas investments, then that’s where the TARP funding will go — Kucinich memo or none.

The lesson here might not be that TARP funds are being abused, but that our financial stability — both for individual Americans and the country as a whole — hinges on the decisions of an industry that has a moral obligation to neither.

Legislation that set stricter guidelines on TARP spending passed the House in January, but Senate Democrats never took it up, instead choosing to trust Treasury Secretary Tim Geithner to manage the funds more responsibly than his predecessor.

He hasn’t gotten great reviews so far.

Writing in Florida’s Sun Sentinel yesterday, University of Maryland economist Peter Morici called the Treasury’s effort to fix the banks “simply inadequate.”

“No solution to preserve private banking can be found without halting the freefall in housing prices,” Morici wrote. “That will require an aggregator or bad bank to purchase about $2 trillion in mortgage-backed securities from banks.”

Geithner, Morici adds, “has other plans whose motivations only the gods above Mount Olympus can divine.”

Kucinich, Morici and other anxious observers may get more answers this week. Kucinich’s subcommittee is scheduled to hold a hearing Wednesday on waste and abuse under TARP. Leading the panel of witnesses will be Neel Kashkari, the Bush administration’s pick to manage the $700 billion bailout.

Maybe Kashkari will  know what hole these many billions of dollars have fallen into, because no one else seems to have a clue.

Alberto Thompson | I live in Vancouver, Canada, and work as a web developer and graphic designer. Back end programming (PHP, Django/Python, Ruby on Rails) to front end engineering (HTML, CSS, and jQuery/Javascript), digital usability, user interface, and graphic design are all areas of web development where I spend my days. I'm a huge fan of web creation and design in all of its forms, as well as assisting small businesses and artisans with their online presence.

Related

Pentagon Shooter Exploited Gun-Show Loophole

John Patrick Bedell, who shot and wounded two police officers near the Pentagon earlier this month, bought at least one of his 9 mm guns at a Nevada gun show,

MA-Sen: 150 Conservative Bloggers Fan Out, Looking for Scandals

BOSTON -- The mysterious Election Journal blog, which first released the infamous 2008 video of two bumbling New Black Panther Party members waving nightsticks

MA-Sen: Brown Wins

BOSTON -- At 9:20, the first rumors of Scott Brown’s victory in the Massachusetts Senate race started to work around the room. A moment later, Doug Flutie

MA-Sen: 66 to 19

BOSTON -- That, via Alex Isenstadt and Josh Kraushaar, is the number that defined the Massachusetts Senate race more than anything else. From the primary

MA-Sen: A Text Message From Scott Brown

BOSTON -- Having signed up for Scott Brown’s text message service for election day, I just got this text: Are you about to have lunch? It’s a great time to

MA-Sen: Out-of-Staters for Brown

BOSTON -- A surprising discovery at yesterday’s People’s Rally in Worcester was just how many people had traveled into the state to assist, in whatever way,

MA-Sen Photos: ‘Paint the Town Red! Croakley’s Dead!’

Below are some photos of yesterday’s People’s Rally in Worcester, the rally that Brown held to counter-program the Obama rally in Boston. The crush of

Menendez, Lautenberg to Continue BP-Lockerbie Investigation

Sens. Robert Menendez and Frank Lautenberg, both New Jersey Democrats, will continue to seek details about BP’s alleged involvement in the release last year of

Net Investors Bullish on Palin’s Prospects for Staying on Ticket

Just for fun, the Internet prediction Website Intrade has opened a contract on whether Alaska Gov. Sarah Palin will be withdrawn as McCain’s running mate.

No Experience Necessary

Gov. Sarah Palin’s a middle-class hockey mom, but does that really qualify her to be vice president?

© Copyright 2021 The Washington Independent All Rights Reserved

Terms & Privacy | twi.news@washingtonindependent.com