Praise for Congress has been rare on these pages, but we have nothing but good things to say about the Congressional Oversight Panel report that found a disturbing lack of transparency and accountability in the $700 billion Troubled Asset Relief Program.
Chaired by Sen. Ted Kaufman, D-Del., the COP was tasked by Congress to keep track of how the U.S. Treasury Department managed TARP. The new report points to two major flaws that raise troubling questions about the managerial competence of Treasury Secretary Timothy Geithner.
First, the department has essentially turned over management of TARP to nearly 100 private companies, awarding contracts totaling $434 million. That approach, according to COP, “creates significant concerns about transparency and potential conflicts of interest.” Every official document that ends up in a contractor’s file is thereby put out of reach of the Freedom of Information Act. Treasury officials have consistently refused to make public documents concerning the performance of these contractors, as well as the terms of the government’s contracts with them.
And TARP documents are put even further out of reach when contractors use subcontractors, as they often do, thus creating what the COP calls “an umbrella shielding contractors, financial agents, and Treasury from the need to disclose valuable information about the disposition of taxpayer funds.”
Unfortunately, federal courts have upheld federal agency claims that they no longer control such documents and therefore cannot be expected to provide them in response to FOIA requests. While government officials often claim that tracking contractor and subcontractor data is too complex and costly, the Congressional Oversight Panel rejected such reasoning, albeit in a footnote.
Second, the panel eviscerates the Treasury Department for its reliance upon Fannie Mae and Freddie Mac for major management functions under TARP. As COP chairman Kaufman explained, “the largest TARP contracts, provided to Fannie Mae and Freddie Mac, raise particular concerns. Both Fannie Mae and Freddie Mac have a history of profound corporate mismanagement, and both companies would have collapsed in 2008 were it not for government intervention. Further, both companies have fallen short in aspects of their performance, making errors and missing deadlines.”
Since Fannie and Freddie are contractors, they are immune to public disclosure of documents critical to the ability of Congress and taxpayers to evaluate their performance. Fannie Mae alone has more than 600 people working on TARP, which is more than twice as many as the department does.
No wonder the Treasury Department’s special inspector general reported earlier this year that TARP is rife with conflicts of interest, tax law violations, securities fraud, and mortgage fraud. Congress should revise TARP’s authorization to require public disclosure of all documents and convene an investigative panel with subpoena power to force this dark program into the sunlight.