More concerns about TARP

A Congressional oversight panel keeping tabs on the $700 billion Troubled Asset Relief Program said Wednesday the Treasury Department must monitor the recipients of government aid more closely, and must spell out more clearly who qualifies for aid. 

The newly formed Congressional Oversight Panel for Economic Stabilization said in its first report that the Treasury Department needs better methods for evaluating how banks and other recipients use their taxpayer funding, and what impact it has on the economy.

"If the funds committed under TARP have an intended purpose and are not merely no-strings-attached subsidies to financial institutions, then it seems essential for Treasury to monitor whether the funds are used for those intended purposes,'' the panel said. "Without that oversight, it is impossible to determine whether taxpayer money is used in accordance with Treasury's overall economic stabilization strategy. Treasury cannot simply trust that the financial institutions will act in the desired ways; it must verify.''

The group, headed by Harvard University law professor Elizabeth Warren, called for more transparency in the Treasury Department's process for picking which banks get  government investments through the $250 billion capital purchase program.

"The Oversight Panel believes it is critical for Congress and the public, including participants in the banking industry, to understand exactly what the criteria are for receiving money under the TARP programs; what the strategic intentions of the criteria are, if any; what the strategic effects of the criteria area, and how the criteria advance the purposes of the Act."

The panel noted that some critics have questioned whether the government stock purchases will give some of the banks that receive the money a competitive advantage over banks that choose not to apply.

One member of the oversight panel, U.S. Rep. Jeb Hensarling, did not give his approval to the report. Hensarling, a Republican from Texas who voted against the TARP legislation, suggested in a prepared statement that the panel was rushed in preparing the report, and that the document did not represent a truly bipartisan effort.

Hensarling expanded on those comments in testimony before the House Fianncial Services Committee.

Neel Kashkari, the Treasury Department official overseeing TARP and other economic stabilization efforts, also gave testimony at the hearing..

The oversight panel said it would release its next report, on the administration of the TARP program, Jan. 10. It plans to release another report on Jan. 20, providing recommendations for reforms to the financial regulatory structure.