This morning we sent a letter to the Chairs and Ranking Members of the Senate Committees on Finance, Banking, and Homeland Security & Governmental Affairs, and the House Committees on Financial Services and Oversight & Government Reform. Our overriding worry is the nearly stunning lack of openness and transparency in the actions taken thusfar pursuant to the bailout, or the Troubled Assets Relief Program (TARP). To quote ourselves (this is my favorite graf):
Our overriding concern is the utter lack of information about who is making critical decisions involving untold billions of taxpayer dollars. It is not clear how banks or other institutions are chosen to be bailed out or allowed to fail. It is a mystery to us and to the public why one industry is favored and another is left to suffer. We are at a loss to understand how particular companies or institutions within particular industries are blessed and others are not. Irrespective of whether the decisions are made by political appointees, career employees, or Members of Congress, the decision-making process has been a nearly perfect black box.
We pointed out issues of continuing concern about various bailout-related efforts, including the clouded authority of the Special IG now that the TARP has metamorphosed from the original idea of buying up the “troubled assets” or toxic mortgages that started the meltdown, into one of the Treasury forcing its funds down the craws of major banks in the hopes that credit would loosen up and flow down to other more needy institutions as well. We ask why the administration continues to oppose a “mortgage mitigation” plan championed by FDIC chair Sheila Bair and supported by Senate Banking Chairman Chris Dodd (D-CT) that would allow the FDIC to fund the expenses for banks that try to rework homeowners' defaulting mortgages rather than letting them succumb to more foreclosures, thereby continuing the downward cycle.
We also ask about regulating these complicated derivatives and credit-default swaps, and wonder why more restrictions could not be placed on U.S. banks receiving bailout funds as was done in the U.K., where British banks are not allowed to pay out dividends until the government is first repaid, and cash bonuses for bank executives are verboten. Further, the banks there promised they would boost lending to small businesses and homeowners.
We also raised some red flags about a number of specific troubling events we've noticed in recent weeks that we think demand some serious examination. These include Treasury apparently paying a substantial premium for Goldman Sachs stock, and a new tax break that could provide an unwarranted windfall for some banks. There are questions about the bond rating agencies and their apparent conflicts of interest as well as continuing questions about the decisions to buttress AIG and Fannie Mae and Freddie Mac.
But all these specific issues and concerns and problems are merely examples of that one huge overarching issue: the lack of basic information, providing the transparency and openness upon which the functioning of a democracy not to mention a viable economy must depend. We end our letter calling on Congress in the strongest possible terms to hold policymakers accountable and to demand the answers the public has a right to hear.
-- Beverley Lumpkin