WASHINGTON (12/3/08)—The Government Accountability Office (GAO) has issued a study on the U.S. Treasury Department’s Troubled Asset Relief Program and has found Treasury has yet to address a number of critical issues. The GAO acknowledged that TARP, created under the Emergency Economic Stabilization Act, had existed less than 90 days at the time of the study. It further noted a new program of such magnitude”faces many challenges, especially in this current uncertain economic climate.” However, Treasury has yet to address a number of critical issues, including determining how it will ensure that TARP’s capital purchase program ( CPP ) is achieving its intended goals and monitoring compliance with limitations on executive compensation and dividend payments. The CPP is a preferred stock and warrant purchase program, through which Treasury has provided more than $150 billion in capital to 52 institutions as of Nov. 25. To help ensure the program’s “integrity, accountability, and transparency,” GAO recommends that Treasury take the following steps:
* Work with the bank regulators to establish a systematic means of determining and reporting in a timely manner whether financial institutions’ activities are generally consistent with the purposes of CPP and help ensure an appropriate level of accountability and transparency; * Develop a means to ensure that institutions participating in CPP comply with key program requirements (e.g., executive compensation, dividend payments, and the repurchase of stock); * Formalize the existing communication strategy to ensure that external stakeholders, including Congress, are informed about the program’s current strategy and activities and understand the rationale for changes in this strategy to avoid information gaps and surprises; * Facilitate a smooth transition to the new administration by building on and formalizing ongoing activities, including ensuring that key Office of Financial Stability (OFS) leadership positions are filled during and after the transition; * Expedite OFS’s hiring efforts to ensure that Treasury has the personnel needed to carry out and oversee TARP; * Ensure that sufficient personnel are assigned and properly trained to oversee the performance of all contractors, especially for Contracts priced on a time and materials basis, and move toward fixed-price arrangements whenever possible; * Continue to develop a comprehensive system of internal control over TARP, including policies, procedures, and guidance that are robust enough to protect taxpayers interests and ensure that the program objectives are being met; * Issue final regulations on conflicts of interest quickly and review and renegotiate mitigation plans to enhance specificity and compliance; and * Institute a system to effectively manage and monitor the mitigation of conflicts of interest.
Every 60 days, the U.S. Comptroller General is required to report on a variety of areas associated with oversight of TARP. Use the resource link below to access the complete GAO report.