Treasury Stands Down from Attempt to Challenge SIGTARP's Authority

The Wall Street Journal reported this morning that the Treasury Department has withdrawn its request to have the Justice Department clarify the relationship between Treasury and the Special Inspector General for the Troubled Asset Relief Program (SIGTARP). POGO and others had viewed Treasury’s request as a thinly veiled attempt to challenge the SIGTARP’s authority, so we’re very glad to see this standoff come to an end.

Special IG Neil Barofsky sent a letter to several Members of Congress yesterday announcing Treasury’s decision (we’ve requested a copy of the letter and will post it as soon it’s available). He said he views their withdrawal as an “acknowledgment that SIGTARP is an independent entity within Treasury, and that my office and I are not subject to the supervision of the secretary.”

Here’s the back story. A few months ago, Barofsky sent a memo responding to three questions from Treasury: (1) Is SIGTARP an independent entity within Treasury? (2) Is SIGTARP subject to supervision by Treasury? and (3) Is the attorney-client privilege a valid reason for Treasury to withhold documents from SIGTARP? Barofsky made a strong case in defense of his office’s authority, arguing that Congress clearly intended to “preserve SIGTARP’s independence and not subject [it] to the Secretary’s ability to shut down an audit or investigation.” Not satisfied with his response, Treasury sent a request to the Justice Department’s Office of Legal Counsel asking it to “clarify the SIGTARP’s complex legal status within the executive branch.”

Treasury isn’t providing any explanation as to why they withdrew their request, but whatever the reason was, we agree with Senator Charles Grassley (R-IA) that this whole episode has been a “needless distraction.” The SIGTARP’s been doing great work—in just the past few weeks, they’ve come out with audits on executive compensation, bailout lobbying, and the use of TARP funds at over 360 banks—and with Treasury’s challenge out of the way, this watchdog is free to continue barking as loudly as it wants.

-- Michael Smallberg

UPDATE: Barfosky's letter is available here.