Yesterday, the House Committee on Oversight and Government Reform’s Subcommittee on Domestic Policy held a hearing to review Treasury’s efforts to prevent waste and abuse of TARP funds. Witnesses at the hearing included:
- Neel Kashkari, Acting Interim Assistant Secretary for Financial Stabilization, Department of Treasury
- Professor Anthony B. Sanders, W.P Carey School of Business, Arizona State University
- Stephen Horne, Vice President, Master Data Management and Integration Services, Dow Jones & Co.
- Mark Bolgiano, President and Chief Executive Officer, XBRL US, Inc.
- Neil M. Barofsky, Special Inspector General for the Troubled Assets Relief Program
- Richard Hillman, Managing Director, Financial Markets and Community Investment, Government Accountability Office (GAO)
Subcommittee Chairman Dennis Kucinich (D-OH) set the tone for the hearing in his opening remarks, in which he leveled criticism at Treasury for its failures to impose limitations on use of TARP funds by recipients of government assistance or to require “detailed information about their spending.” He expressed particular concerns about the propriety of “$8 billion of financing arranged by Citigroup for public authorities in Dubai; a $7 billion investment by Bank of America in the China Construction Bank Company; a $1 billion investment by a J.P. Morgan Chase subsidiary in expanding operations in India,” each of which he said “since these banks received billions in a taxpayer funded bailout.”
The first witness, Treasury’s Neel Kashkari, was questioned by frustrated subcommittee members about the use of TARP funds. Kashkari emphasized TARP as a “necessary precondition” to an economic rebound, and stressed that lending decisions should remain in the control of financial institutions, and not politicians. Chairman Kucinich criticized Treasury for allowing recipients of TARP funds to use the money for foreign investments. Kashkari cautioning against rules that limit overseas investment in the context of a global economy. Lawmakers also questioned Kashkari on the role of political pressure in the distribution of TARP funds. Kashkari claimed that such pressure had no role in the distribution of funds. When questioned about Treasury’s efforts to monitor the use of TARP funds, Kashkari admitted that the tracking procedures in early distributions were insufficient, but pointed to the fungible nature of money, and the difficulty of distinguishing between federal and non-federal funds.
Neil Barofsky, Special Inspector General for the Troubled Assets Relief Program, announced that he will soon report the findings of his investigation into the role of lobbyists in the distribution of funds. When asked about transparency, Barofsky discussed the large number of TARP participants that voluntarily disclose how the federal funds are spent. He noted that his office was “exploring task force and similar regional relationships throughout the country to deter criminal activity before it occurs, and to investigate and prosecute any and all who attempt to profit criminally” from the crisis. He announced the formation of a “multi-agency task force” focused on the Federal Reserve’s Term Asset Backed Securities Loan Facility (TALF) that “will work collectively to identify fraud vulnerabilities in the TALF program and proactively and aggressively investigate any indications of wrongdoing associated with the program.”
Richard Hillman of the GAO announced that the GAO has increased its staff levels to help oversee the distribution and tracking of TARP Funds.