Amid the whirlwind of debate about how to improve the financial regulatory system, the House Financial Services Committee is considering several measures this week that could have a huge impact on the transparency of the government’s bailout programs under the Troubled Asset Relief Program (TARP).
First, the Committee is putting the finishing touches on a bill introduced by Rep. Carolyn Maloney (D-NY) that would create a centralized TARP database with continuous updates on the distribution of TARP funds. The legislation (H.R. 1242) calls for the integration of information from both public and private sources, including “regulatory filings, internal models, financial models, and analytics associated with the financial assistance” received under TARP. Earlier this year, POGO joined a coalition of good government groups in support of the bill, although we call on the Committee to clarify that the database will be made available to the public. The bill explicitly states that the data will be provided to TARP's Inspector General (SIGTARP), the Government Accountability Office (GAO), and the Congressional Oversight Panel, but we believe the public also has a role to play in holding officials accountable for the distribution of TARP funds.
Second, the Committee is considering several measures that would allow the GAO to audit the Federal Reserve. The Fed has come under increased scrutiny lately thanks to its central role in the bailout—as the SIGTARP recently reported, the total amount of potential support provided by the Fed could reach nearly $7 trillion, which includes the creation of new lending facilities as well as support for specific institutions such as AIG and Citigroup. There is now widespread agreement that the public deserves to know more about the Fed’s role in the bailout, especially since the Fed is continuing to block the release of information such as the names of the banks that have received trillions of dollars in emergency loans.
For months now, momentum has been growing behind Rep. Ron Paul’s (R-TX) legislation (H.R. 1207) to remove a provision of the current law that prevents the GAO from auditing the Fed’s most important activities. The bill now has over 300 co-sponsors in the House, and has attracted support from a coalition of groups from across the political spectrum, including POGO. It appears the Committee will not be voting on the measure as a stand-alone bill, so Reps. Paul and Alan Grayson (D-FL) have introduced a new amendment that is very similar to H.R. 1207, but includes some changes made in response to concerns raised by Fed officials. For instance, the new amendment sets a 180-day time lag for the release of details on the Fed’s market actions, and makes clear that the GAO cannot make recommendations on the Fed’s monetary policy.
But despite these concessions, a rival measure has been introduced by Rep. Mel Watt (D-NC) that could potentially narrow the scope of the GAO’s audits. Rep. Watt told his colleagues on the Committee that his amendment “strikes a sensible balance between providing increased transparency to the public, while preserving the long-standing independence of the Federal Reserve regarding the making of monetary policy.” Others feel his measure goes too far, and may even place new restrictions on the GAO. In response to Watt’s amendment, Paul and Grayson are encouraging their fellow Committee Members to “reject the false dichotomy between transparency and independence” (Rep. Grayson warns that the Watt amendment would only allow GAO auditors to “count the pencils on the desks” and “perhaps check on proper Metro card usage”). Ryan Grim writes that the amendment would “let the multi-trillion dollar organization continue throwing tax dollars around in secret,” since it forces the GAO to comply with current restrictions and prevents auditors from looking at the loans and liquidity arrangements the Fed enters into. And Dean Baker argues that the Fed’s sacrosanct monetary policy actually deserves to come under greater scrutiny, since it helped lead to the $700 billion TARP vote and the funneling of billions of dollars to counterparties such as Goldman Sachs through the AIG bailout.