Treasury Announces Guidelines for Oversight of TARP

In a statement before the Financial Services Committee of the US House of Representatives, Neel Kashkari, Interim Assistant Secretary of the Treasury for Financial Stability, outlined his department’s goals for the handling of the Troubled Asset Relief Program (TARP).

TARP Oversight

According to Kashkari, the Acting Comptroller General’s and the Government Accountability Office (GAO) have both met with the Office of Financial Stability to monitor the program. The GAO released its first TARP report on December 2 (sixty days after the program’s enactment) which identified nine areas deserving of the Treasury’s special attention:

1. Monitoring and reporting on the activities of financial institutions — to determine how well the CPP is achieving its desired effect
2. Compliance of CPP participants with program requirements — to require that participants adhere to restrictions on executive pay
3. Keep people informed by using a strategy to communicate more effectively
4. Develop a plan for TARP to allow a smooth transition from the outgoing Bush administration to the incoming Obama administration
5. Hire more quickly in order to fully staff the Office of Financial Stability
6. Hire enough staff (and good staff) to monitor the performance of contractors
7. Keep developing a comprehensive system of internal controls and accounting procedures
8. Finalize the regulations for dealing with conflicts of interest
9. Put a system into place so that conflicts of interest can be managed and resolved.

The GAO’s report highlights many areas in line with the Treasury’s goals, which demonstrates how TARP is complying with Congress’s strict regulations.

Finally, the law called for the creation of a Congressional Oversight Panel to review TARP, which was recently formed and convened.

Reporting and Transparency

The law created numerous requirements for reporting TARP results to the public. According to Kashkari, the Treasury has met and will continue to meet these requirements, explained below:

1. to publish a Transaction Report within two business days of each transaction
2. to publish a Tranche Report to Congress within one week for each commitment of $50 billion. The report must detail all transactions made to date, their financial impact, challenges ahead and any further necessary actions towards said challenges.
3. to furnish a report on the overall program no later than 60 days after TARP has made its first purchase of assets.

Kashkari insisted that the financial system has averted collapse and in fact stabilized because of TARP. However, it will still take a few months for the relief funding to take effect and confidence to grow again before credit is extended and banks resume making loans.

He concluded his remarks by emphasizing that transparency is of the highest priority in order to gain greater public trust and bolster the markets with more credit flowing in to the system.

“While we have made significant progress, we recognize challenges lie ahead. As Secretary Paulson has said, there is no single action the federal government can take to end the financial market turmoil and the economic downturn, but the new authorities that you and your colleagues provided in October dramatically expanded the tools available to address the needs of our system. We are confident that we are pursuing the right strategy to stabilize the financial system and support the flow of credit to our economy.” –Neel Kashkari, Interim Assistant Secretary of the Treasury for Financial Stability