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Increasing GAO powers
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04/14/09 01:15 PM ET
Soon before the April recess, government investigators expressed frustration that they could not get more information from the executive branch on how it is spending funds from the $700 billion Troubled Asset Relief Program (TARP).
In testimony before the Senate Finance Committee, the Government Accountability Office (GAO) said it is having difficulty measuring TARP’s effectiveness for various reasons, including a lack of data from the Treasury Department.
The Finance Committee wanted to have the Treasury’s Neel Kashkari testify about the TARP funds, but Treasury spurned the invitation.
Treasury has now disbursed more than $303 billion out of the $700 billion allocated. The amount of government money involved is “huge” and “strains the comprehension of taxpayers and policymakers alike,” Finance Committee Chairman Max Baucus (D-Mont.) said.
Government watchdogs like the GAO must have access to more data, but that is easier said than done when it comes to the Federal Reserve, because GAO’s powers are limited.
Finance Committee ranking member Chuck Grassley (R-Iowa) said at the March 31 hearing that Treasury’s increasing reliance on partnerships with the Federal Reserve “threaten[s] the ability of the GAO to monitor the program effectively.”
The limitation, Grassley pointed out, seeks to ensure the Federal Reserve’s independence in monetary policy. “However,” Grassley said, “its unprecedented actions in the last year have taken it far beyond traditional monetary policy.”
Baucus and Grassley have introduced legislation that would increase GAO’s powers on TARP funds.
Gene Dodaro, the acting head of GAO, told the Finance panel that his agency has the authority to oversee the activities of Treasury, but not the Federal Reserve.
“We would fully support legislation to provide GAO with audit authority over those activities, together with appropriate access, recognizing the sensitivity of this area and the need for careful drafting.”
This newspaper is not endorsing the Baucus-Grassley bill (nor opposing it), but is endorsing the goals of the legislation. It is important to take account of the danger of giving GAO too much authority to delve into the Federal Reserve’s business, but it is clear it needs more power. With power comes responsibility, and the Fed is on the verge of acquiring much greater power.
And this debate will not end with TARP.
The Obama administration and House Financial Services Committee Chairman Barney Frank (D-Mass.) are discussing the idea of broadening the Federal Reserve’s power as part of the effort to ramp up regulatory oversight of the financial sector. Frank wants the so-called system risk regulator, which would have jurisdiction over mortgage-backed securities and other products, to be housed at the Federal Reserve.
If the Federal Reserve gains these new powers, it should also be ready to be more open to scrutiny from watchdog agencies like the GAO.
In testimony before the Senate Finance Committee, the Government Accountability Office (GAO) said it is having difficulty measuring TARP’s effectiveness for various reasons, including a lack of data from the Treasury Department.
The Finance Committee wanted to have the Treasury’s Neel Kashkari testify about the TARP funds, but Treasury spurned the invitation.
Government watchdogs like the GAO must have access to more data, but that is easier said than done when it comes to the Federal Reserve, because GAO’s powers are limited.
Finance Committee ranking member Chuck Grassley (R-Iowa) said at the March 31 hearing that Treasury’s increasing reliance on partnerships with the Federal Reserve “threaten[s] the ability of the GAO to monitor the program effectively.”
The limitation, Grassley pointed out, seeks to ensure the Federal Reserve’s independence in monetary policy. “However,” Grassley said, “its unprecedented actions in the last year have taken it far beyond traditional monetary policy.”
Baucus and Grassley have introduced legislation that would increase GAO’s powers on TARP funds.
Gene Dodaro, the acting head of GAO, told the Finance panel that his agency has the authority to oversee the activities of Treasury, but not the Federal Reserve.
“We would fully support legislation to provide GAO with audit authority over those activities, together with appropriate access, recognizing the sensitivity of this area and the need for careful drafting.”
This newspaper is not endorsing the Baucus-Grassley bill (nor opposing it), but is endorsing the goals of the legislation. It is important to take account of the danger of giving GAO too much authority to delve into the Federal Reserve’s business, but it is clear it needs more power. With power comes responsibility, and the Fed is on the verge of acquiring much greater power.
And this debate will not end with TARP.
The Obama administration and House Financial Services Committee Chairman Barney Frank (D-Mass.) are discussing the idea of broadening the Federal Reserve’s power as part of the effort to ramp up regulatory oversight of the financial sector. Frank wants the so-called system risk regulator, which would have jurisdiction over mortgage-backed securities and other products, to be housed at the Federal Reserve.
If the Federal Reserve gains these new powers, it should also be ready to be more open to scrutiny from watchdog agencies like the GAO.
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