By Silla Brush - 09/24/09 04:00 AM EDT
The government is failing to disclose the full details of how the $700
billion bailout of the financial sector has been implemented, the
program's top government watchdog will say on Thursday.
Neil Barofsky, the Special Inspector General over the Troubled Asset Relief Program (TARP), will testify to Congress that the government's "basic attitude" on the transparency and accountability of the program "remains a significant frustration."
The Obama administration has worked to increase the transparency of the TARP program, which began in October 2008 at the height of the financial crisis, and Barofsky will say the TARP program has become less opaque since his office got under way in December.
"Treasury remains committed to working closely with all of our overseers to ensure taxpayer funds are used prudently and effectively," a Treasury Department spokesman said. "Treasury has already implemented the vast majority of their recommendations and has worked actively to incorporate SIGTARP early in the development of processes regarding TARP programs."
Despite his concerns about transparency and accountability, Barofsky will testify the TARP program has been essential to shoring up the economy and restoring a measure of stability to the economy.
However, the government will likely never be repaid all the money it invested, according to Barofsky. Forty-one banks have already repaid more than a combined $70 billion, but hundreds of banks, General Motors, Chrysler, AIG and the broader housing market continue to rely on the program.
"It is extremely unlikely that the taxpayer will see a full return on its TARP investment," Barofsky will say.
Democrats increasingly praise the TARP program as a necessary step that helped the economy avert a meltdown, and they have lauded the repaid money as evidence that the rescue package is working. Meanwhile, Republicans are critical of the program for extending taxpayer money to failing private companies and creating a culture where troubled businesses look to the federal government for a bailout.
Barofsky also will warn that it is unclear that the government rescue package has done much to increase the amount of bank lending or yet to remove toxic assets from bank balance sheets. Those were two of the program's initial aims. Moreover, the commercial real estate market "might be the next proverbial shoe to drop," Barofsky will caution.
The Treasury Department soon will start to report more details about how TARP recipients are using the money, including their total investments and their repayments of debt obligations. The department will not report on how specific firms allocate funds. "We remain puzzled as to why Treasury refuses to adopt our recommendation to report on each TARP recipient's use of TARP funds," Barofsky will say.