President asks Congress to release remaining $350 billion in TARP funds
When Congress approved the TARP act, they put into the legislation a provision to provide an oversight body to insure that both Congress and the American people would know where the billions of dollars of taxpayer monies were going, how banks were using the money they received, was the money effectively being used to open vital credit markets, and to provide transparency in the use of the monies.
Since the dispersal of first $350 million, the media has reported that Treasury does not know where the money has gone and that the banks have refused to provide any data on how it was used. Meanwhile, credit card rates have skyrocketed, even for good borrowers, and credit markets remain largely locked up which is having a devastating effect on businesses, both large and small.
While banks continue to state that they are lending, the truth is that borrowers must have a FICO score of over 700, the best possible score, to be able to borrow. As a result of the bank imposed credit crunch, thousands of small to mid sized businesses are being forced to shutter their doors. Even large companies like Oracle are being hit by the credit crisis and resulting market/sales plunge. Oracle, which has laid off staff only once in the company’s history, plans layoffs in beginning in January.
Although it took well over a month for the Oversight Panel to be named and installed, the head of the Panel is Harvard Law Professor Elizabeth Warren.
Elizabeth Warren is an outspoken critic of bank lending practices, particularly in the area of credit cards. In a Sept 20, 2004 interview, PBS’ Frontline stated:
A professor of law at Harvard University, Elizabeth Warren is an expert on bankruptcy and an outspoken critic of consumer lenders. She is the author of several books including, most recently, The Two-Income Trap: Why Middle Class Mothers and Fathers Are Going Broke. Here, she discusses the range of deceptive and unfair practices she says the credit card companies try to hide in the fine print of card agreements and she lays out the remedies that should be put in place to protect the consumer. She is especially outraged by those who argue that the debt problem facing Americans is really a tiny fraction of the overall economy and that such consumer spending has helped keep the economy afloat. “Seventy percent of American families last year said that they are carrying so much debt that it is making their family lives unhappy,” says Warren. “Middle-class Americans, hard working, play-by-the-rules Americans, Americans who lost a job, who don’t have health insurance, who are in the middle of a divorce — those are the Americans who are carrying enormous credit card debts.”
The Congressional Oversight Panel launched their website on January 9 to provide Americans the promised transparency. This Panel, after being organized, sent Treasury a list of 10 questions to be answered regarding the TARP funds and their dispersal. Tonight, Professor Warren told Lou Dobbs of CNN that Treasury responded to approximately half of the questions asked.
She stated that, in her opinion, Treasury is not particularly concerned with oversight. She believes that Treasury views the need – or desire of the American public – to know where the monies have gone to be relatively unimportant.
On Jan. 9, the Congressional Oversight Panel released their first report, showing the answers the Panel’s questions. The report is posted on the Panel’s website under Reports.
Larry Summers, the head of President-Elect Obama’s Economic team, is reported in the New York Times as having:
sent a letter to Congressional leaders, pressing them to approve the [remaining $350 billion] funds and promising a dramatic overhaul the bailout program, including more oversight and a “sweeping” new effort to prevent home foreclosures.
“The president-elect also shares the frustration of the American people that we have seen too little effect from this rescue plan on jobs, incomes and the ability of responsible homeowners to stay in their homes,” he wrote. “He believes the American people are right to be angry with the way this plan has been implemented.”
Additionally, the New York Times reported today,
After a meeting with the president of Mexico on Monday, Mr. Obama said the additional $350 billion would be critical to his efforts to stabilize the economy and he promised to improve the management of the program.
“It is clear that the financial system, although improved from where it was in September, is still fragile and I felt that it would be irresponsible for me with the first $350 billion already spent, to enter into the administration without any potential ammunition should there be some sort of emergency or weakening of the financial system,” Mr. Obama said.
“I think many of us have been disappointed with the absence of clarity, the lack of transparency, the failure to track how the money’s been spent and the failure to take bold action with respect to areas like housing, consumer credit, so that we can maintain credit,” he said, adding: “So my commitment is that we are going to fundamentally change some of the practices in using this next phase of the program.”
As American taxpayers, we deserve to know exactly where TARP funds are going and how they are being used. It’s our money that is being spent…and potentially the monies of our children and grandchildren. With good fortune, the equity stakes in each of the banks that have received TARP funds will be returned to Treasury with interest…although it is clearly apparent that Treasury Secretary Paulson failed to negotiate the best deal possible. Foreign governments have negotiated far better tax payer deals with their banks. But, then again, Paulson is a creature of Wall Street and, in my opinion, apparently feels a greater loyalty to Wall Street than the American people for whom he should serve, first and foremost.
Regardless, though, as taxpayers we deserve to know exactly where our tax monies are being spent, especially so in an economy wherein so many are losing their jobs, their homes, and their ability obtain reasonably priced credit.