Inspector general says TARP needs more oversight
All isn't gloom and doom in the report, though. Barofsky does praise the Treasury and the Fed for creating some safeguards and suggests several more measures that could protect taxpayers. But the picture he paints isn't pretty. The report is going to show that TARP and other initiatives could carry a price tag of $3 trillion -- yes, that is trillion with a T -- for a program that started with a cost of $700 billion.
Barofsky levels his glare at the Treasury's plans to match every $1 of private investment and to use that money to leverage a loan from a fund backed mainly by the Fed. Barofsky feels that this plan would "dilute the incentive for private fund managers to exercise due diligence." His recommendation is for no use of Fed loans without "significant mitigating measures . . . included to address these dangers." The New York Times sums up this take in this morning's headline, "Bank Aid Programs Are Seen as Open to Fraud."
Barofsky's report is very critical about the Treasury Department's flat-out refusal to require detailed information from banks and other financial institutions about where the money is going. Echoing the outrage many people felt when they learned of American International Group (AIG)'s free-spending ways after it received TARP funds, Barofsky states, "Failure to impose this requirement with respect to the injection of yet another $30 billion into A.I.G. would not only be a failure of oversight, but could call into question the credibility of the government's efforts."
It certainly seems that the taxpayer has found a hero in the form of Neil Barofsky. While warning against the possibility for fraud from the TARP program, Barofsky also criticizes the Obama administration's plan to purchase questionable assets from banks at the cost of $100 billion.
Of course, will any of this amount to anything? Will Barofsky's comments have an impact or will they simply fall by the wayside? I truly hope that I am wrong, but these are the type of comments that are often swept under the rug. A good sign is that the talking heads at CNBC are actually going to interview Barofsky and allow him to take the bailout programs to task on air. Nevertheless, Treasury Secretary Geithner and the current administration have agendas. We'll see if they continue with them or take Barofsky's advice to heart. Geithner is set to discuss the report later today at a Congressional hearing.
Barofsky supposedly has a decent amount of pull in Congress -- a group that does seem to be getting fed up with the rampant spending. Will it matter? Maybe it's just my grumpy side surfacing (as my three-year-old daughter would say), but I have my doubts.