The Treasury Department posted a solicitation yesterday for companies who will help manage hundreds of billions of dollars worth of stock, warrants and debt it will receive from banks and other participants in its financial industry rescue program.
The 16-page solicitation is a good illustration of the level of detail that the government requires from the contractors but does not pass along to the taxpayers who are funding the $700 billion program.
For example, companies bidding on the job must describe the composition and expertise of the employee team that will be overseeing the work, and must provide biographies of the senior members on the project.
None of the contracts the Treasury Department has issued to date for work under the Troubled Asset Relief Plan included details on the managers or other key personnel. In one case, involving an accounting-services contract, the agency blacked out the names of the individuals assigned to the project when it posted the agreement on its web site.
The Treasury Department also requires bidders to describe their proposed fees, and the reasons and logic behind them. None of the contracts that the agency has made public included an explanation of how the compensation was determined. In several instances, the sections covering fees were either blacked out or redacted.
The Treasury Department also is requiring the banks, brokerage firms and other companies bidding for the work to provide information on any current or potential conflicts of interest.
Bidders must disclose whether they or a corporate parent or subsidiary have sought assistance through the Troubled Relief Asset Plan. They also must disclose whether they hold any assets for other banks or institutions that are participating in TARP, or whether they have any other connections to companies involved in the program.
In announcing its earlier contracts, the Treasury Department did not mention any of those potential conflicts or say how they might be mitigated. The agency left it to journalists and other outsiders to point out the possible overlaps.
The contractors bidding on the asset-management work will value the securities purchased by the government, analyze the continuing financial condition and risk profiles of the institutions that issued them, and advise Treasury on the best time to cash out the government's investments.
Under the Treasury Department's plan to inject capital into banks, the government is buying preferred stock that pays a 5 percent dividend for the first five years and 9 percent thereafter. The Treasury Department also will get warrants to buy common stock in the participating banks, which could be exercised at a profit to taxpayers if the shares rise.
The Treasury Department said it would choose its asset managers based on a number of factors, including the company's proposed fees and costs, its capabilities and track record, its financial and management stability and the qualifications of the employees to be assigned to the project. The deadline for applications is Nov. 13.
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