Today, amidst frustration of how TARP funds were initially dispersed, House Financial Services Committee Chairman, Rep. Barney Frank (D-MA) introduced H.R. 384 “TARP Reform and Accountability Act of 2009." If passed, this legislation would amend the TARP provisions of the Emergency Economic Stabilization Act of 2008 to, among other things, strengthen accountability, increase transparency and assist community financial institutions in receiving a portion of the remaining $350 billion TARP funds. The bill would make the following key changes:

  • Require that any institutions currently receiving TARP funds to make quarterly updates on its use of funds;
  • Prohibit the use of TARP funds to acquire healthy institutions unless Treasury and the institution’s primary banking regulator agree that the acquisition benefits taxpayers and could have been completed without the use of TARP funds;
  • Impose regulatory oversight on non-insured depository institutions that receive TARP funds;
  • Prohibit offering incentives that encourage excessive risk-taking and golden parachute payments for executives for the duration of the investment;
  • Direct Treasury to make TARP funds available to smaller community institutions;
  • Revise the HOPE for Homeowners provisions to simplify administrative hurdles and authorizes payments to servicers participating in successful refinancing;
  • Permanently increase deposit insurance coverage to $250,000;
  • Extend the FDIC Restoration Plan to 8 years;
  • Add the FDIC Chairman and two individuals selected by he President to the Financial Stability and Oversight Board (“Board”) and give the Board authority to overturn policy decisions made by the Treasury Secretary by a two-thirds vote;
  • Expressly authorize the use of TARP funds for auto manufacturers; and
  • Reserve at least $40 billion of the remaining $350 billion for foreclosure mitigation, requiring Treasury to develop a detailed plan to prevent and mitigate foreclosures on residential mortgages by March 15, 2009, and to implement that plan by April 1.