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Report: Reining in Wall Street
Failing the Bailout
Following the collapse of major financial institutions Congress enacted a sweeping $700 billion taxpayer-financed bailout of the financial sector. However, months into the program and billions of dollars later, no one knows how the money was spent and no one is convinced that it’s achieved any of the intended results. The U.S Public Interest Research Group Education Fund (U.S. PIRG) believes it is critical for Congress to demand and the Department of Treasury to implement mechanisms and metrics to make sure that the actions of the TARP recipients reflect the original goals and objectives of the Emergency Economic Stabilization Act (EESA). Those mechanisms must be based on the sound public policy principles of oversight and accountability.
The report first establishes that what is known about how the TARP recipients’ behavior before, during and after the bailout paints a dire picture of how the TARP funds were spent. It then presents a clear opportunity for lawmakers to regain some of the withering faith of the American people through widely supported execution tactics and simple communication practices with respect to TARP.
• Without specific, proactive oversight, the TARP program will continue to fail. TARP fund recipients are not going to voluntarily comply with the intent of the EESA law or provide reports on their actions.
• The Congressional Oversight Panel (COP), the Special Inspector General, the Government Accountability Office and two bills currently active in Congress all provide actionable recommendations and pose tough questions to the Department of Treasury for reforming TARP. Treasury should consider the provisions and recommendations to reform TARP.
• Taxpayers deserve to know, in a clear and concise way, which reforms have occurred, to restore some level of confidence that the next $350 billion will be allocated and implemented fairly, strategically and with upfront sign-off on accountability measures.
To help achieve these ends, U.S. PIRG Education Fund created a set of metrics and proposes the use of a TARP Report Card. The metrics are based on reports from leading government watchdogs, including the Government Accountability Office (GAO), the COP on the TARP and the TARP Special Inspector General. This report describes why that report card is needed. Based on the lack of any information about where the first $350 billion went, and the real possibility that Treasury never asked or required any information, the first report card, attached, gives the Bush Administration an F in almost every oversight category for its fourth quarter 2008 actions.
We will continue to issue quarterly report cards to track efforts by the fledgling Obama administration. Some early efforts are promising, such as its restrictions on lobbying by firms receiving TARP funds, its efforts to increase transparency and its actions on excessive executive pay and bonuses. We recommend that the Obama administration consider use of the report card to keep American taxpayers and lawmakers aware of the progress made in reforming the program.
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