As Obama Plans to Overhaul Bailout, Oversight Panel Has Tough Questions for Treasury

The Post leads this morning with a story on the Obama administration's plans to revamp the $700 billion Troubled Asset Relief Program (TARP).  Led by Treasury Secretary nominee Timothy Geithner and senior economic adviser Lawrence Summers, Obama's team is preparing to make significant changes that will expand the scope of the bailout beyond Wall Street, provide more direct aid to homeowners and small businesses, and place stricter conditions on firms that receive TARP funds.

The administration might have a difficult time convincing Congress to release the second installment of $350 billion, with many Members raising concerns that the bailout program has failed to unfreeze lending markets or stem the foreclosure crisis.  The Post reports that Geithner might also have to answer tough questions at his confirmation hearing about his role in managing the bailouts of Bear Stearns, AIG, and Citigroup when he was president of the Federal Reserve Bank of New York.  In the meantime, Rep. Barney Frank (D-MA), chairman of the House Financial Services Committee, introduced legislation today that would amend the Emergency Economic Stabilization Act of 2008 to increase transparency and accountability.

The Post also reports that the Congressional Oversight Panel is planning to release a report today that criticizes Treasury officials for failing to answer the Panel's previous questions about the bailout.  In its first report released last month, the Panel posed 10 questions to Treasury in an effort to clarify the Department's strategy for stabilizing financial markets, reducing foreclosures, and protecting taxpayers from wasteful and fraudulent expenditures.  Today's report makes clear that the Panel was less than impressed with Treasury's response: “it is unclear how any conclusions can be drawn about the program's effectiveness,” according to a draft version of the report.  The Panel will ask Treasury once again to explain what it is doing to stabilize markets, prevent foreclosures, and require more disclosure from banks that receive TARP funds.

POGO found Treasury's response to be somewhat insulting, with many of the answers copied from earlier public statements, often referencing work that was done back in 2007.

We'll post a link to the Panel's report as soon as it's available.

-- Michael Smallberg

UPDATE: Click here to download the report.