WASHINGTON – The US Treasury's new 700 billion dollar financial rescue program has serious accountability and transparency problems, a congressional watchdog said Tuesday.
The Troubled Asset Relief Program (TARP), which has poured billions of dollars into financial institutions and through its capital purchase program (CPP), needs improvement, the US Government Accountability Office (GAO) said.
"Treasury has yet to address a number of critical issues, including determining how it will ensure that CPP is achieving its intended goals and monitoring compliance with limitations on executive compensation and dividend payments," the GAO said in a 72-page report to congressional committees.
Under the TARP, crafted by Treasury Secretary Henry Paulson and launched on October 3, the Treasury has provided through the CPP -- a preferred stock and warrant purchase program -- more than 150 billion dollars in capital to 52 institutions as of November 25, the GAO noted.
"GAO recognizes that TARP has existed for less than 60 days and that a new program of such magnitude faces many challenges, especially in this current uncertain economic climate," the investigative arm of Congress said.
Among its recommendations to the Treasury "to help ensure the program's integrity, accountability, and transparency," the GAO said further actions were needed to formalize transition planning efforts for the incoming administration of president-elect Barack Obama.
It also called for measures to "establish an effective management structure and an essential system of internal control."
The GAO recommended that the Treasury work with the bank regulators to establish a systematic process of determining and reporting "in a timely manner" whether financial institutions' activities are generally consistent with the purposes of the CPP, and to help ensure an appropriate level of accountability and transparency.
The GAO said it was "too soon" to know whether the program was having its intended impact on credit and financial sectors, highlighting the difficulty of distinguishing the TARP's effects among a series of US and foreign governments aimed at stabilizing financial markets.
But it said it found "preliminary indicators" that the TARP was working as intended, including "trends in interest rate spreads, mortgage rates, mortgage originations and foreclosures."
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