The Special Inspector General for the Troubled Asset Relief Program (SIGTARP) has just come out with a new audit with recommendations for limiting outside influence over the TARP decision-making process.
The audit is specifically focused on the Capital Purchase Program (CPP), which has provided billions in TARP funds to "banks that are healthy, but desire an extra layer of capital for stability or lending." As the audit explains, banks must submit an application in order to be considered for capital investments under the program. These applications are reviewed by the four federal banking agencies--the Federal Deposit Insurance Corporation, Office of the Comptroller of the Currency, Federal Reserve Board, and Office of Thrift Supervision--before being passed on to Treasury for a final decision.
Here are the main findings:
- Treasury and the federal banking agencies have strong control mechanisms in place--such as multiple levels of review--to limit any outside influence on the decision-making process;
- There is little evidence to suggest that CPP applicants have unduly influenced any funding decisions so far; and
- Controls could be improved by implementing two recommendations: 1) Treasury should "explicitly document the vote of each Investment Committee member for all decisions related to the investment of TARP funds;" and 2) Treasury and the federal banking agencies should "document the occurrence and nature of external phone calls and in-person meetings about actual and potential recipients of funding under the CPP and other similar TARP assistance programs to which they may be part of the decision-making."
Although there have been several recent stories about Members of Congress allegedly trying to steer bailout funds to banks in their district--including Rep. Barney Frank (D-MA), Rep. Maxine Waters (D-CA), and Sen. Daniel Inouye (D-HI)--this is one of the first major reports POGO has seen on outside firms exerting their influence on the agencies that are actually making the decisions about which banks to fund. We're glad to hear that Treasury's Office of Financial Stability concurs with the SIGTARP's recommendations and is preparing to implement them.
As the audit points out, President Obama has already taken steps to document the interactions between federal agencies and lobbyists on issues related to recovery spending (ProPublica has done a great job of compiling these disclosure reports). POGO hopes that Treasury and the banking agencies take similar steps to make their decisions more transparent, so that taxpayers can determine whether banks are unduly exerting their influence over the TARP process.