Dodd, Finance Official Share Conflicting Views On TARP

By Laura Smith

The Committee on Banking, Housing and Urban Affairs held a meeting Thursday to talk about the Emergency Economic Stabilization Act and TARP (Trouble Asset Relief Program).

The panel consisted of Herbert M. Allison, Jr., Assistant Secretary for Financial Stability; Neil Barofsky, Special Inspector General for the Troubled Asset Relief Program; Gene L. Dodaro, Acting Comptroller General of the United States; and Elizabeth Warren, Chair of the Congressional Oversight Panel.

Chairman Christopher J. Dodd (D-CT) said Treasury Secretary Henry Paulson, Federal Reserve Chairman Ben Bernanke, and SEC Chairman Chris Cox came to Congress with an important message, and that was that the American economy was close to a total collapse.

“Our nation was in the midst of an economic crisis that threatened small businesses’ ability to make payroll, cost us more than half a million jobs, turned the American dream of homeownership into a nightmare for many, kept students from getting college loans, and wiped out hundreds of billions of dollars in savings that Americans were counting on for their retirement,” he said.

He said the Bush administration had a proposal on how to help large and small businesses who were unable to access the credit they needed to operate, but called it was unacceptable.

He stated that the Bush administration asked for an unprecedented amount of taxpayer money and executive power under the unchecked control of one unelected individual, with no guidelines to ensure that it would be used properly.

“Doing nothing wasn’t an option. But neither was this proposal,” Dodd said.

Herbert Allison said earlier this year that what the nation faced was no longer just a financial crisis; it was a full-blown economic crisis. He said that in January alone, 741,000 Americans lost their jobs, home foreclosures were at a rapid rate, and businesses and families were struggling to find credit.

“In short, the economy was in a free fall and there was increasing concern we were headed towards a second Great Depression,” Allison said.

He said a comprehensive strategy was put in place to stabilize the financial system and the housing market, to stimulate economic activity, and to provide help to those in most need.

“TARP has been vital to our achievements to date, and it will continue to be an important part of our recovery. The recovery has just begun, the financial system remains fragile, and the credit markets are not fully functioning. And with unemployment still unacceptably high, home foreclosures still rising, and many Americans still suffering through no fault of their own, we still have work to do,” Allison said.

He stated that EESA had authorized $700 billion for TARP, and that as of September 21, 2009, Treasury has announced plans to provide $644 billion for specific TARP programs.

“Of that amount, we have entered into commitments of $444 billion, and we have disbursed $365 billion,” he said.

Allison said a large part of the total activity to date occurred last fall under the Capital Purchase Program (CPP) following the adoption of EESA in October 2008.