Elizabeth Warren goes to Washington.
WASHINGTON — Although hundreds of well-trained eyes are watching over the $700 billion that Congress last year decided to spend bailing out the nation's financial sector, it's still difficult to answer some of the most basic questions about where the money went.
Despite a new oversight panel, a new special inspector general, the existing Government Accountability Office and eight other inspectors general, those charged with minding the store say they don't have all the weapons they need. Ten months into the Troubled Asset Relief Program, some members of Congress say that some oversight of bailout dollars has been so lacking that it's essentially worthless.
"TARP has become a program in which taxpayers are not being told what most of the TARP recipients are doing with their money, have still not been told how much their substantial investments are worth, and will not be told the full details of how their money is being invested," a special inspector general over the program reported last month. The "very credibility" of the program is at stake, it said.
Access and openness have improved in recent months, watchdogs say, but the program still has a way to go before it's truly transparent.
For its part, the Treasury Department said it's fully committed to transparency, and that it's taken unprecedented steps to report the status of TARP to the public. It regularly posts information on which banks have received money, as well as details about each of those transactions. Further, Treasury said, it doesn't agree with all of its watchdogs' recommendations, which it said could hamper the program's effectiveness.
TARP was passed in the midst of last fall's financial meltdown as a way to keep American banks from falling deeper into the abyss.
The program was controversial from the start. Its supporters say it's helped spark bank lending in the country, but critics say it's unfairly rewarded the big banks and Wall Street firms that pushed the economy to the brink.
The program also has undergone a major transformation. When the Bush administration first went to Congress for the money, TARP's main purpose was to buy up hundreds of billions of dollars in bad mortgages and so-called mortgage-backed securities that were bought and sold on Wall Street.
Today, TARP consists of 12 programs that sent those hundreds of billions of dollars to big banks, but it's also bailed out auto companies, auto suppliers, individuals delinquent on their mortgages, small businesses and American International Group, the big insurance company.
The watchdogs now must oversee the maze that TARP has become.
Just because a lot of people are watching, however, doesn't mean they get everything they want to see.
One of the most prominent watchdogs is Elizabeth Warren, a Harvard Law School professor who chairs a TARP oversight panel created by Congress.
Her panel has released 10 major reports that examine TARP's plans and policies, finding that much of the work by the Treasury and the Federal Reserve has been opaque, with unclear or contradictory goals.
One report took Treasury to task for vastly undervaluing more than $250 billion in transactions with the country's major banks, and another suggested several ways to revamp federal regulation over the financial sector. Other reports have criticized the Treasury for its initial defensiveness in opening its books.
Despite its mandate, however, the panel doesn't have subpoena power. That means it can ask, but can't compel, officials from Treasury, the Federal Reserve or the nation's banks to testify.
Henry Paulson, the Treasury secretary under former President George W. Bush, repeatedly stiff-armed the panel. Timothy Geithner, the current secretary, has been more open, but so far has testified just once before Warren's group. Geithner is scheduled to appear again in September, and has agreed to do so quarterly, and two other senior Treasury officials also have appeared.
The relative lack of testimony from top officials, however, is one reason why critics of Warren's panel think it hasn't delivered on its promise.
In June, in an otherwise mundane congressional hearing, Republican Rep. Kevin Brady of Texas surprised Warren with an aggressive critique of the panel, saying it's failed to help taxpayers understand what Treasury is doing with the billions at its disposal.
"There's been very little value that the panel has brought to this issue or even insight on how these bailout dollars have been used," he said. "I frankly believe at this point, given the reports that we've seen again with little value, I think the panel needs to be abolished."
Warren defended the panel's work, saying the lack of subpoena power means we "only have the capacity to invite" witnesses.
"So you asked Secretary Paulson in the first month of existence?" Brady asked.
"I believe we asked him repeatedly," Warren said. "We asked him in our first month, in our second month, in our third month."
Warren said she took the criticism seriously, dropping by Brady's congressional office as soon as the hearing adjourned. The two had never met before, she said, and "I was really surprised," by his comments.
"He said he felt frustrated," she said. "He wanted us to be even blunter" in the panel's reports.
Brady amplified his comments in an interview last month, saying that some of the panel's work seems like a "PR ploy" and that "the moment has passed" for Warren's group to play the role Congress envisioned.
His feelings have been partially echoed by two other members of the panel, Rep. Jeb Hensarling of Texas and former Sen. John E. Sununu of New Hampshire, both Republicans appointed by congressional GOP leaders (the other three members were appointed by Democrats).
Both have accused the panel of mission creep — of straying from the central goal of determining exactly how, and how well, Treasury is doing its job.
Hensarling said that "taxpayers have not received answers as to whether the TARP program works, how decisions are being made or what the banks are doing with the taxpayers' money." While he praises the "very smart people on the panel," he said too many questions have been left unexplored.
He acknowledges that the lack of subpoena power makes things tough. "But even if we had it, I'm not sure we would have used it," said Hensarling, who's pushing to abolish TARP.
The other primary watchdog is Neil Barofsky, a special inspector general named in November by Bush specifically to track TARP funds. His office does have subpoena power, and a growing staff that's expected ultimately to have 160 people pursuing audits and criminal investigations.
It's also made a series of recommendations to the Treasury, asking that it do more to reveal how TARP money is being spent. Treasury has adopted some of its recommendations, but rejected others — including one of the most important: Giving taxpayers precise details on how TARP funds have been used by banks.
The recommendation involves one of the most visible aspects of TARP: investing $218 billion in 650 banks, helping them to strengthen their balance sheets and boost lending to American businesses and homeowners.
Barofsky's office has long advocated that the Treasury require banks to detail how the TARP money they've received has been used. The department has refused, saying that once an investment is made in a big bank, it's not possible to track how it's used.
Barofsky's office rejected that assertion, and did its own survey of 360 institutions, finding that most could say how they'd used the money.
"Treasury's reasons for refusing to adopt this recommendation have been squarely refuted by" the inspector general, his office reported to Congress.
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