Yesterday, the Government Accountability Office issued its first report on the oversight of Treasury’s Troubled Asset Relief Program. The report (GAO-09-161) makes several recommendations intended to improve the integrity, accountability, and transparency of TARP. This report will be the first of many: section 106 of the Emergency Economic Stabilization Act requires a GAO report on TARP within the first 60 days – hence the current report – and then every 60 days thereafter.

Although the GAO recognizes that Treasury has had only two months to implement a complex program, the report’s recommendations are clear that many oversight mechanisms are missing. The recommendations are broadly worded and include some self-evident observations, among them that Treasury needs to monitor compliance by participating institutions with the TARP requirements (executive compensation, dividends, etc.) and that the department needs to work with the banking agencies to oversee how participants are using TARP funds. Several of the recommendations go to internal administrative matters, including the transition from the Bush to the Obama administration, hiring of necessary and qualified personnel, and avoidance of conflicts of interest.

One interesting recommendation that is at best ambiguous is for the development of an internal control system that is “robust enough to protect taxpayers interests and ensure that the program objectives are being met.” Whether this recommendation means greater transparency for the Capital Purchase Program seems doubtful. One of the significant criticisms of the CPP is that applicants have little meaningful understanding of the criteria that Treasury and the banking agencies apply to each application. With the deadlines for applications either past or quickly approaching, any effort to explain the relatively unknown criteria will come too late. If the Obama administration initiates a second round of CPP-type investments, perhaps greater transparency will attend that effort.