By LOREN STEFFY Copyright 2008 Houston Chronicle
Two months after the government unfolded the TARP, it and the other federal programs related to the bailout are looking more like a blanket of secrecy.
The Troubled Asset Relief Program, as the $700 billion bailout program approved by Congress is known, was supposed to be conducted with transparency and oversight.
The TARP and other provisions of the federal bailout, however, remain shrouded in uncertainty. TARP, though, is only one piece of the overall bailout. The Federal Reserve and the Treasury have been shoveling huge piles of money into the markets during the past two months through channels that don’t require congressional approval, yet taxpayers have little idea where the money is going or what the government is getting in return.
The Fed, for example, refuses to say who received some $2 trillion in emergency loans that have showed up on its balance sheet.
Nor will it disclose the collateral for those loans.
This month, Bloomberg News filed a lawsuit against the Fed, demanding it disclose the information after the central bank denied the news agency’s request under the Freedom of Information Act.
By the end of last week, a group of lawmakers cried for disclosure.
“There cannot be accountability in government and in our financial institutions without transparency,” Sen. John Cornyn, R-Texas, said in a prepared statement. “Many of the financial problems we are facing today are the direct result of too much secrecy and too little accountability.”
Not everyone in Congress shares Cornyn’s concerns. Asked whether the Fed should reveal the collateral it accepted, Rep. Barney Frank, D-Mass., who heads the House Financial Services Committee, told Bloomberg he’d discussed the matter with Timothy Geithner, head of the New York Fed and a possible candidate for Treasury secretary in the Obama administration.
“I talked to Geithner, and he was pretty sure that they’re OK,” Frank told Bloomberg.
We’ll all no doubt sleep easier knowing that our government has loaned $2 trillion to potentially troubled financial institutions and the guardians of our economy are “pretty sure they’re OK.”
Frank added that revealing the collateral would give people clues as to the value of those assets.
Can’t tell how it’s going
That’s exactly the point.
Without knowing the value and the kind of assets the Fed received from troubled banks, taxpayers can’t determine the effectiveness of the bailout or whether the money is being used properly.
Nor do we have any idea what might happen if the value of the collateral falls. Presumably, at least some of the collateral is distressed mortgage securities — that was, after all, what the bailout was supposed to address — many of which are being downgraded by credit agencies.
The shroud of secrecy extends beyond the emergency loan program.
As I wrote a few weeks ago, the Treasury Department has issued contracts for professional firms hired to manage the bailout. While it disclosed the contracts, it blacked out key terms and in some cases the names of individuals assigned to work on the bailout.
Bailoutsleuth.com, a Web site started by Dallas Mavericks basketball team owner Mark Cuban, has filed a Freedom of Information request for missing information from six contracts.
Meanwhile, the Washington Post reported last week that the Treasury hasn’t filled the independent oversight posts required by Congress when it passed the bailout legislation six weeks ago.
The deadline for the first monitoring report passed without it being filed, the Post reported.
All of which presents us with a disturbing progress report on a our most expensive and extensive financial recovery plan since the Great Depression.
Aside from the banks identified under the TARP program, we don’t know who’s getting the money. We don’t know what, if any, guarantees we’re getting in return. We don’t know the details of the people hired to run it. And no one is protecting our interests.
We need something better than lawmakers being “pretty sure we’re OK.” We need to know. We need disclosure.
We need to find out what’s under the TARP.
Loren Steffy is the Chronicle’s business columnist. His commentary appears Sundays, Wednesdays and Fridays. Contact him at firstname.lastname@example.org . His blog is at http://blogs.chron.com/lorensteffy/ .