COP, America’s Financial Paper Tiger

The Congressional Oversight Panel (COP) recently issued a report on the TARP.  This report represents the second in a monthly series of reports to be issued while there are outstanding TARP investments.  While the COP report generated a lot of media attention drawing criticism of the TARP’s expenditure and opaque process.

However, the media did not cover how powerless COP really is.  In the full text of the report, the panel repeatedly states that Treasury did not answer many of its questions – either effectively or in entirety.  The tough questions did not get answered or were simply avoided.

In the words of COP, they are “concerned that Treasury’s initial response to our questions is not comprehensive and seems largely derived from earlier Treasury public statements.”  Unfortunately, the panel is working as designed by the legislation laying out the TARP.  The COP simply does not have the power to demand answers from Treasury.

Furthermore, the COP looks to expand its power by making “recommendations on the best ways to [minimize] foreclosures” in their third report – due out early next month.  This may sound great, but the COP does not even have the statutory power to make such recommendations.  Only the Financial Stability Oversight Board has such a power.

  1. When the COP asked Treasury about its strategy in administering the TARP, Treasury responded with programs that were not a part of TARP at all.  This problem also arised in addressing the strategy to reduce foreclosures.
  2. The COP “continues to believe that Treasury needs to set forth the metrics by which these goals will be judged.”  In other words, the Treasury refuses to tell the COP or for that matter the public about criteria to judge how TARP are being spent.

Most interesting, when asked about what financial institutions, assisted by the TARP, have done with the bailout money, their reponse seems to dodge the issue.  “Treasury appears to believe the question is beside point” citing larger market trends as making the TARPs impact difficult to ascertain.

The COP also asked about what Treasury is doing to “help the American family.”  While this may seem like an increadibly vague question, Treasury responded by saying that access to consumer credit does not involve suggesting or forcing banks to take consumer-friendly actions.

In a separate statement by panel member Sen. John E. Sununu, he states that taking this sort of action is completely inappropriate because  “the current crisis was caused, in large part, by the extension of too much credit to institutions and individuals that were not creditworthy.”

Unanswerable or inappropriate questions posed to adminstrators of billions of taxpayer dollars serves as the basis for a poor program.