Taxpayers have shoveled billions of dollars in bailout funds to banks since last October in hopes of preventing a credit system collapse and, someday, getting the money back. But how do we know that some of that money isn't slipping through the cracks?
We don't know, says Neil Barofsky, who is the Special Inspector General for the Troubled Asset Relief Program. In a report, Barofsky said he has made plenty of proposals for better oversight of the money, but so far, he says, the proposals have been routinely ignored.
Barofsky singled out the Treasury Department for much of his criticism. He has asked Treasury to require TARP funds recipients to track exactly how they are spending the money. As of now, no such requirement has been imposed.
He says his suggestion of a "firewall," to prevent insiders from taking advantage of their knowledge, has also been ignored.
"Although Treasury has taken some steps towards improving transparency in TARP programs, it has repeatedly failed to adopt recommendations that SIGTARP believes are essential to providing basic transparency and fulfill Treasury's stated commitment to implement TARP 'with the highest degree of accountability and transparency possible,' " Barofsky said in his report.
Barofsky repeated much of his complaints in prepared testimony Tuesday morning before a House Oversight panel.
Congress insisted on establishing a Special Inspector General when it approved the first $700 billion bailout last fall--a sum that, at the time, seemed quite large. Since then, Barofsky's office has launched 35 criminal and civil investigations into a range of allegations from accounting and securities fraud to insider trading and public corruption.
Barofsky said some of the investigations have already led to charges against some accused of fraud in the administration of the government's bailout program.
In advance of his testimony, Baroksky said the U.S. taxpayers have now spent--or have committed to spend--more than $23 trillion to prop up institutions and individuals caught up in the worst of the recession.
A Treasury Department official calls Barofsky's figures "inflated," noting they contain funding that has already been repaid. In fact, in one instance, Treasury officials say the government earned $4 million in interest.
Barofsky's main complaint seems to be what he sees as a lack of transparency in the administration of the TARP funds. He said banks have all said they intend to use TARP funds to shore up their balance sheets, but there is no requirement for banks to show what they have done with the funds.