Today, Neil Barofsky, the Special Inspector General for the TARP, appeared before the Senate Finance Committee to lay out his efforts to track TARP money. Barofsky explained that his office has asked for and received responses from all of the TARP recipients regarding their use of the funds, which he claimed directly rebuts the Treasury Department’s charge that tracking the money is “challenging at best.” As Barofsky said:
One thing, however, was apparent from the responses – complaints that it was impractical or impossible for banks to detail how they used TARP funds were unfounded. While some banks indicated that they had procedures for monitoring their use of TARP money, others did not but were still able to give information on their use of funds.
This is a big improvement over where we were just a few months ago, when the banks simply refused to provide information about where their TARP funds were going. Whether they’ve broken down and provided answers because someone is actually putting some effort into getting them, or because of the bad PR connected to all the secrecy is anyone’s guess, but this is a promising development.
So where is the money going? Last week, JP Morgan CEO Jamie Dimon said that banks were using “some” TARP money appropriately. In a report he provided to the committee, Barofsky fleshed this out a bit more:
Respondents provided diverse answers to how funds received have been used such as to strengthen the capital base of individual banks providing a foundation for lending activities; retiring debt, purchasing mortgage backed securities, increasing credit lines, making loans, etc.
Now, its not immediately worrisome that banks are buying mortgage backed securities, but as we noted last week, some bailed-out banks may be speculating on toxic assets with TARP money. This is something worth keeping an eye on.
Barofsky said that his report “makes an even stronger case for a recommendation we made back in December and which up until now has not been adopted — Treasury should require TARP recipients to monitor their use of funds and be required to provided certified reports to Treasury on how they are using taxpayer money.”
Elizabeth Warren, chair of the TARP’s Congressional Oversight Panel, reiterated this, and told the committee that “we do not seem to be a priority for the Treasury Department.” Indeed, while oversight seems to have improved slightly, the TARP is still not transparent enough to prevent the banks from gambling with taxpayer money.