The Party is on at Treasury

Office Holiday Party canceled this year? Never mind. There's a party going on at the Treasury Department this year, and you've got an open invitation.

That is, if you're a bank, and your balance sheet is still in the black.

As Elizabeth Warren, Harvard Law Professor and Chair of the Congressional Oversight Panel reviewing Treasury's performance in managing the bailout package told Terry Gross in a recent interview, “I don't know of a federal program where that's the only criteria for eligibility: Prove that you're a bank and prove that you're not broke. And if you can prove those two things, you just automatically get a percentage of taxpayer dollars,” (What Does $700 Billion Buy Taxpayers?” Fresh Air, December 11, 2008).

Professor Warren noted that in early December the GAO (the General Accounting Office) produced a report that shows that the government has been handing out funds to banks with little or no oversight mechanisms in place. According to The Wall Street Journal, the report states in part: “Without a strong oversight and monitoring function, Treasury's ability to help ensure an appropriate level of accountability and transparency will be limited,” (“Auditors Fault Treasury Oversight of Bailout Funds,” December 2, 2008).

Professor Warren's assessment is more blunt. “Their report, in my view,” Warren states, “is just a scathing indictment of the Treasury Department.”

In fact, Treasury's actions have produced no discernible effect on helping homeowners facing foreclosure, or students who can't get loans for college or graduate school or consumers who need auto loans. Even small business owners with good payment histories have found that their banks are cutting them off from vital lines of credit they need to survive.

The credit markets remain frozen, banks continue to sit on the taxpayers' money, and Treasury has no way of knowing if that money will go to shareholder dividends, or executive bonuses, or to those who need loans because it has not put any requirements in place to ensure that banks actually start lending again.

To add insult to injury, this morning, Treasury Secretary Hank Paulson had the audacity to make a public demand for Congress to release the remaining $350 billion in the bailout package because the Bush Administration has reluctantly decided to loan $17.4 billion to the three American automakers, effectively using up all the remaining funds that have been authorized so far.

The only defense of its performance that Treasury has been able to offer so far is that its actions, which have shifted from Plan A to Plan B to Plan C with no coherent strategy, have prevented the collapse of the U.S. financial system.

That may be the case, but it's no excuse for handing out taxpayer dollars willy-nilly without oversight or standards of accountability or conflict of interest rules.

Concerns about how Treasury has spent billions of dollars, for which taxpayers will ultimately be accountable, is not an academic exercise. This country has already seen billions in dollars wasted in Iraq as the result of non-competitive bids for contractors and a complete lack of planning for the aftermath of the U.S. invasion.

If we don't want to witness the inevitable Congressional post-mortem about why much of the bailout package failed to help the average taxpayer, we need to act now and let our representatives know that not one single additional penny should be given to Treasury until reasonable mechanisms are putin place to protect the taxpayers' interests and not simply those of the banks who have been receiving the money with virtually no strings attached.

The party is over, Mr. Paulson, and it's time to stop celebrating at taxpayer expense.