Today, the Senate Finance Committee held a hearing on “TARP Oversight: A Six Month Update.” Committee Chairman Max Baucus (D-MT) stated that the aim of the hearing was to survey the oversight issues related to the TARP program, six months after it was created. Chairman Baucus noted that taxpayers are at risk for up to $2.9 trillion under TARP and its associated programs, which is “just short of what the entire Federal Government spent in fiscal year 2008. It’s like having a second United States Government budget, dedicated solely to saving the financial system.” The $2.9 trillion estimate “does not include the $400 billion that the Treasury Department has pledged in support of Fannie Mae and Freddie Mac … the resources that the Federal Reserve is dedicating to shoring up the financial system, which amount to about $3 trillion … [and] the second TARP request for $750 billion in the President’s budget.”

Testifying before the committee were:

  • Neil Barofsky, Special Inspector General for the TARP program (SIGTARP)
  • Elizabeth Warren, Chair of the Congressional Oversight Panel
  • Gene Dodaro, Acting Comptroller General of the Government Accountability Office (GAO)

Mr. Barofsky’s testimony detailed how TARP and its associated funds had been allocated and how his office was working with TARP recipients to figure out how the funds had been used. He noted that his request to TARP recipients to detail their use received a 100% response rate, demonstrating that “complaints that it was impractical or impossible for banks to detail how they used TARP funds were unfounded.” As a result, he pushed for Treasury to 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.” Mr. Barofsky also responded to complaints that his office’s oversight efforts might dissuade participation in TARP programs, stating, “[i]f a bank or financial institution does not want to participate in a TARP program because it is unwilling to disclose what it is doing with taxpayer dollars, or because it is afraid of SIGTARP’s vigorous fraud detection programs, keeping those participants out of the TARP will only benefit the American taxpayer.” As a closing note, he reported that his office in conjunction with the Department of Justice, is conducting an audit of AIG, which will, among other things, “be looking closely to ensure that the bonuses to AIG employees are not inconsistent with AIG’s legal or contractual obligations, [and] to report to Congress the sequence of events which led to the approval of these payments by government officials.”

Ms. Warren detailed her unsuccessful attempts to obtain substantive information from Treasury regarding the Term Asset-Backed Loan Facility (TALF), AIG, and Treasury’s strategy under TARP, generally. Ms. Warren called for “transparency, accountability and a coherent plan with clearly delineated goals are necessary to maintain public confidence and the confidence of the capital markets …,” in addition to “[s]ophisticated metrics to measure the success and failure of program initiatives.”

Finally, Mr. Dodaro discussed the status of GAO’s efforts to address transparency and accountability issues, and how Treasury had implemented several of the GAO’s recommendations that were first introduced in January 2009. These recommendations related to “hiring, contracting, and establishing its internal controls.” Mr. Dodaro stated that “conditions appear to have generally improved in various credit markets since the announcement of the first TARP program,” however, “no single indicator or set of indicators will provide a definitive determination of [TARP’s] impact.”