Today, the House Subcommittee on Financial Institutions and Consumer Credit held a hearing entitled "Tarp Oversight: Is TARP Working For Main Street." Testifying before the Committee were the following witnesses:

Members of the Subcommittee set the initial tone of the meeting in their opening remarks, stating that with respect to the Troubled Asset Relief Program (TARP), there really does not appear to be an "articulated program," or a means to "empower small businesses." In particular, several Subcommittee members stressed the difficulty of assessing whether TARP is actually working, including trying to keep track of how TARP money is being spent and or accounted for, given that TARP data is "[b]uried in filings with over 25 different Federal agencies" and not in a central data depository. Rep. Carolyn Maloney (NY) cited the recent introduction of the "TARP Accountability and Disclosure Act (H.R. 1242) as an attempt to increase oversight and ensure transparency in TARP by creating a centralized, web-accessible public database system in a consistent, standardized format within the Department of Treasury, along with the ability to monitor inconsistencies in near real time.

The witnesses expressed various frustrations with the TARP program, including the following specific items:

  1. Lack of Lending - Financial institutions that have received TARP funds but have also "raised borrowing rates," are "not willing to extend loans" or "lower the interest rates" on loans, or have imposed strict lending conditions which have made small businesses unable to comply with such conditions.
  2. Measuring Lending - The inability to measure linkages between an institution’s receipt of a TARP investment and the institution’s lending.
  3. Use of Funds - Use of TARP funds to cushion capital reserves "to protect against further write downs," rather than to fund new lending.
  4. Mutual Institutions - Treasury's failure to complete work on a term sheet for mutual institutions, in order to allow all community banks to participate in the TARP Capital Purchase Program.

On the issue of bank lending, Mr. Ely cautioned that, notwithstanding the tight credit markets and the general frustration with TARP, banks receiving TARP funds should not necessarily be forced to make "risky loans" in order to make credit flow to small businesses.