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That’s 11 zeros for those not counting. $23.7 trillion dollars – let’s take a moment of silence…. This astronomical number is the total liability that the government has racked up in its series of bailouts of the financial system, according to the Special Inspector General assigned to the Troubled Asset Relief Program (SIGTARP). Neil Bartofsky is heading up the investigation into how the TARP funds are being used, as well as how the Treasury Department plans to increase transparency within the program.
In short: “Don’t ask, don’t tell,” is the Treasury’s policy. Bartofsky, in testimony given before the House Oversight and Government Reform Committee meeting today focused on the lack of transparency which leaves the taxpayers unaware of how their investments in the federal government have fared. The latest Quarterly Report shows the government liability from bailing out the financial services industry totaling $23.7 trillion. Most people are aware of the $800 billion in TARP funds that are on the line, but as SIGTARP emphasized, that is only a collection of 12 recent government programs invested. There are 50 other programs already in place that also need to be included in assessing the risk involved, forming the $23.7 trillion total.
This is the absolute worst-case scenario number that could be lost, but it is important to consider that even if just a small percentage $23.7 trillion liability is lost, it is still an exorbitant price tag for a program that has done litte to ease unemployment So where what has the IG uncovered about the use of TARP money? Instead of being used for its stated purpose of increased lending, many companies have reinvested the money, paid back loans, or offered bonuses. Since the government tossed bags of money to the companies with the “Don’t ask, don’t tell” policy, it has been difficult to determine more specific results.
One major problem with the current situation is the Federal Reserve’s high interest rates, which encourage the banks to invest money in the Fed instead of extending new loans – the intended consequence of clearing bad loans through TARP. As Rep. Dennis Kucinich pointed out, the banks are feeling “pressure to get money out there and pressure to keep money to invest.” TARP seems to be at odds with the Fed’s mission: “conducting the nation's monetary policy by influencing the monetary and credit conditions in the economy in pursuit of maximum employment, stable prices, and moderate long-term interest rates.”
Also included in the Quarterly Report was a list of over 30 recommendations to the Treasury aimed at improving transparency – allowing the people to check up on their investments. Of those thirty recommendations, only 5 to 10 have been wholly or partially enacted – among those the awkwardly-designed Recovery.gov. One of the recommendations not in effect is the mandatory reports from recipients of bailout money. The Treasury has only asked for reports from three: AIG, Bank of America, and Citigroup; however the IG’s investigation asked for voluntary reports from the other recipients and found that most were willing and helpful.
While the Treasury challenged the report’s high numbers – as well as the legality of the Special Inspector General position – Bartofsky defended the investigation, “if the numbers are inflated, it was the government who inflated them, not us,” as they recorded all the expenses from government websites and open source materials. Questioning the Treasury’s unwillingness to become more transparent, Committee Chairman Edolphus Towns suggested they were “too cozy with Wall Street.” The more that goes on behind closed doors, the more opportunities arise for waste and inefficiencies– especially with $23,700,000,000,000 at stake.