The government’s bailout program still isn’t a shoo-in to succeed, and needs to beef up its oversight and fraud prevention among other things, according to a report released on Thursday by the Special Inspector General for the program, Neil Barofsky.
“The Troubled Asset Relief Program [TARP] represents a massive and unprecedented investment of taxpayer money designed to stabilize the financial industry and promote economic recovery,” the report noted, adding that “The long-term success of the program is not assured.”
Some of the recommendations in the report included:
Treasury should consider requiring that some baseline fraud prevention standards be adopted.Treasury should consider, before committing TARP funds, requiring that beneficiaries of TALF sign an agreement that includes oversight-enabling provisions.Treasury should give careful consideration before agreeing to the expansion of TALF to include mortgage-backed securities (“MBS”) without further review.TALF should not be expanded to existing “legacy” MBS in its current format.Treasury should establish a compliance protocol with the Federal Reserve before TALF is put into effect.The report recommended immediate attention be given to putting oversight language in TARP contracts with General Motors (GM), Chrysler, Citigroup (C) and Bank of America (BAC), all of which closed shortly after the Special Inspector General took office.
Barofsky did have some language included in Treasury’s term sheet with the auto companies acknowledging his office’s oversight role and giving his office access to relevant documents and personnel.
Barofsky’s report said that he has identified enforcement of executive compensation conditions as one of his office’s primary areas of focus, and the audit division has begun preliminary data collection efforts both from Treasury and from the recipients of TARP funds.
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