Joint Economic Committee Concerned TARP Oversight Panel Not Doing Their Job

Congressional leaders were skeptical over whether the Congressional Oversight Panel was fulfilling its duty to confirm that TARP funds are properly used to restore financial stability.

Professor Elizabeth Warren, Chair of the Congressional Oversight Panel, testified to the Joint Economic Committee today to discuss the oversight of the Troubled Asset Relief Program. Warren believes that there needs to be more transparency, increased accountability within the financial system,and more information from the Treasury regarding the details of their methodologies to distribute TARP funds in order for TARP to work.

In her opening statements, Carolyn Maloney (D-N.Y.), Chair of the Joint Economic Committee, said that while there have been major efforts by the Federal Reserve, the Treasury and the FDIC, there is still fear that our economy will delve into a deeper recession.

The Congressional Oversight Panel (COP), which consists of only 5 members, is responsible for overseeing whether TARP funds benefit American families and improve the economy. It was created last year within the Emergency Economic Stabilization Act. The panel reports to Congress every 30 days. The Panel has most recently assessed the bank stress tests.

The hearing consisted mostly of questions and comments about the recent bank stress tests. Warren recommended that even though stress tests are difficult to replicate, they should be repeated in the future if a bank is in a situation that requires a stress test.

The bank stress tests are a government evaluation of the nation’s largest banks to see how strong they are in an economy that may potentially be worse than currently anticipated.

When asked if she foresees the stress tests continuing, Warren said: “We embrace the stress tests…I know they made everyone nervous at the beginning, but the consequence was ultimately to put more information into the marketplace.” Warren also recommended that banks run their own internal stress tests in between official reporting periods and share the results of those tests with their regulators.

Other committee members expressed concern about misusing TARP money in the financial sector.

“Successful efforts to deal with failing financial institutions had always been marked by transparency and assertiveness in dealing with the financial institutions, demanding greater accountability from the financial institutions, and clarity in the programs,” said Warren when commenting on past efforts, like the Great Depression to revitalize the economy.

U.S. Rep. Kevin Brady (R-TX) said that COP was not an effective panel because they have not been able to get hearings with the banks He also suggested that the panel be abolished and then reconstituted in a form that would create more insight into this issue of bailouts. 

“I don’t know how this panel could be fulfilling it’s responsibility having one hearing with Treasury…None with the banks and the financial institutions as witnesses.  It just seems to me that we tasked you with a great deal of responsibility…There has been very little value that the panel has brought to this issue or even inside on how these bailout dollars have been used,” Brady said.