The Treasury Department has opened 20 criminal investigations into misuse of bailout money, and there is great risk of future fraud without better safeguards, government regulators said today.
Neil M. Barofsky, the department's special inspector general, said in a 250-page audit report.
Mr. Barofsky said his office would not provide details on the investigations unless charges are brought.
The Troubled Asset Relief Program, or TARP, involves 12 different programs and at least $3 billion in spending in the forms of loans, loan guarantees, mortgage modifications, and stock purchases. A number of government agencies are involved, including the Federal Deposit Insurance Corp. and the Federal Reserve.
Mr. Barofsky said the very nature of the program was "inherently vulnerable to fraud, waste and abuse, including significant issues relating to conflicts of interest facing fund managers, collusion between participants, and vulnerabilities to money laundering."
His report singled out for concern the Term Asset-Backed Securities Loan Facility, a program that allows the government to spend $1 trillion to buy distressed consumer credit and small business loans from banks. The inability to remove these loans from their books is seen by some as an obstacle to getting liquidity flowing again in the capital markets.
Mr. Barofsky said that the TALF program was particularly vulnerable to fraud and mismanagement because Treasury officials are planning to rely on credit agency ratings to determine the value of the securities.
"Credit ratings, cited as one of the primary credit protections in TALF as currently configured, have been proven to be of questionable value," the report said. "The wholesale failure of the credit rating agencies top rate adequately such securities is at the heart of the securitization market collapse, if not the primary cause of the current credit crisis.
To help identify fraud and abuse, Mr. Barofsky said his office had created a TALF task force, including representatives from the Federal Reserve Board, the FBI, U.S. Immigration and Customs Enforcement, and the U.S. Postal Inspection Service.
The inspector general's office is also currently conducting six audits of TARP-related activities, including surveys of executive compensation among bailout recipients; the influence of outside actors on Treasury Department decision-making; and the large payments by the American International Group Inc. to its counterparties in controversial derivatives deals.
Neil M. Barofsky, the department's special inspector general, said in a 250-page audit report.
Mr. Barofsky said his office would not provide details on the investigations unless charges are brought.
The Troubled Asset Relief Program, or TARP, involves 12 different programs and at least $3 billion in spending in the forms of loans, loan guarantees, mortgage modifications, and stock purchases. A number of government agencies are involved, including the Federal Deposit Insurance Corp. and the Federal Reserve.
Mr. Barofsky said the very nature of the program was "inherently vulnerable to fraud, waste and abuse, including significant issues relating to conflicts of interest facing fund managers, collusion between participants, and vulnerabilities to money laundering."
His report singled out for concern the Term Asset-Backed Securities Loan Facility, a program that allows the government to spend $1 trillion to buy distressed consumer credit and small business loans from banks. The inability to remove these loans from their books is seen by some as an obstacle to getting liquidity flowing again in the capital markets.
Mr. Barofsky said that the TALF program was particularly vulnerable to fraud and mismanagement because Treasury officials are planning to rely on credit agency ratings to determine the value of the securities.
"Credit ratings, cited as one of the primary credit protections in TALF as currently configured, have been proven to be of questionable value," the report said. "The wholesale failure of the credit rating agencies top rate adequately such securities is at the heart of the securitization market collapse, if not the primary cause of the current credit crisis.
To help identify fraud and abuse, Mr. Barofsky said his office had created a TALF task force, including representatives from the Federal Reserve Board, the FBI, U.S. Immigration and Customs Enforcement, and the U.S. Postal Inspection Service.
The inspector general's office is also currently conducting six audits of TARP-related activities, including surveys of executive compensation among bailout recipients; the influence of outside actors on Treasury Department decision-making; and the large payments by the American International Group Inc. to its counterparties in controversial derivatives deals.
published April 21, 2009, 0 Comments
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