Sen. Bob Bennett (R-Utah) brings up a conversation he had with Treasury Secretary Timothy Geithner where the Treasury Secretary says that he believes that once TARP funds are repaid they can be used again for similar purposes. Bennett says that this is a misrepresentation of the original intention of the controversial program. (0:36)
John DuBois, University of New Mexico-Talk Radio News Service
Senators John Thune (R-S.D.) and Bob Bennett (R-Utah) introduced the TARP Sunset Act Tuesday in the hope of making sure the controversial program, meant to stabilize the U.S. financial system, does not extend beyond this year.
“Now is the time to end this program to ensure that additional taxpayer dollars are not wasted since TARP has devolved into a slush fund for the administration,” said Thune.
The TARP Sunset Act will eliminate Treasury Secretary Timothy Geithner’s ability to spend outstanding funds after the end of 2009.
“[The] crisis has passed and the usefulness of TARP therefore is over,” said Benett. “It should be terminated is that this administration is using it like a revolving credit account.”
By Ravi Bhatia – Talk Radio News Service
Bank of America (BOA) executives, including two members of the bank’s board of directors, testified Tuesday in front of the House Oversight Committee to explain how a private deal between BOA and Merrill Lynch turned into a federal bailout.
The $50 billion deal between the two banks occurred in September, 2008 and saved Merrill Lynch from bankruptcy. A January 2009 report of its earnings, however, showed that Merrill Lynch lost $21.5 billion in the fourth quarter of 2008, requiring the government to subsequently provide it with an emergency $15 billion preferred stock investment through the Troubled Asset Relief Program.
Committee Chairman Rep. Edolphus Towns (D-N.Y.), claimed during Tuesday’s hearing that the government did not force Bank of America to take the bailout. Towns noted that it was former Bank of America Chairman Ken Lewis who asked former Treasury Secretary Hank Paulson on Dec. 17, 2008 to intervene.
“That one phone call put everything in motion,” Towns said. “Lewis claimed that he believed Bank of America could back out of the deal with Merrill Lynch based on the Material Adverse Change clause in the merger agreement – the so-called ‘MAC clause.’ [Former Bank of America General Counsel Timothy J.] Mayopoulos was suddenly fired nine days later without explanation and replaced by a senior insider who had not practiced law in years.”
Mayopolous testified Tuesday that, “Based on information [that was] already disclosed to shareholders, a reasonable investor would have been on notice that Merrill Lynch might well suffer multi-billion dollar losses in the fourth quarter of 2008.”
During his prepared remarks, Mayopolous also denied involvement in Bank of America’s approving Merrill Lynch to pay billions of dollars in bonuses to its employees. However, he did advise Steele Alphin, Bank of America’s Chief Administrative Officer, that Merrill Lynch, not Bank of America, should determine year-end bonuses for Merrill Lynch employees.
“I also advised Mr. Alphin, however, that it was appropriate for him to make clear to the Chair of Merrill’s Compensation Committee that it would be inappropriate for John Thain, Merrill Lynch’s CEO, to be paid a year-end bonus,” Mayopolous said. “My advice was not legal advice that such a bonus would be illegal, but rather my business judgment as to what would be best for the combined company.”
Bank of America’s President of Consumer and Small Business Banking Brian Moynihan said Tuesday he was proud of the role his firm has played in the economy “during this period of economic difficulty,” and that Bank of America’s acquisition of Merrill Lynch helped prevent a further financial collapse.
“We have extended $759 billion in new credit since we filed our first report in the fourth quarter of 2008,” he said. “That represents almost $17 for every dollar of the $45 billion of taxpayer assistance to the Bank of America.”
Special Master for TARP Executive Compensation Kenneth Feinberg – referred to by some as the White House Pay Czar – talks about the first thing he does when he examines an executive compensation contract. (0:57)
By Laura Smith – University of New Mexico/Talk Radio News Service
Treasury Official Kenneth Feinberg testified on Wednesday before the House Oversight and Government Reform Committee about his review of the bonuses paid to executives at the seven largest TARP recipients.
According to Feinberg, the Special Master for Executive Compensation under the Troubled Asset Relief Program – also referred to by some as the White House’s ‘Pay Czar’ – those recipients include American International Group (AIG), Bank of America, Citigroup, Chrysler, Chrysler Financial, General Motors and GMAC.
“For the last five months, I have a narrow mandate under the law, and that was to determine pay compensation packages for the top 25 officials in just seven companies that receive the most TARP assistance,” he said.
Feinberg explained that he received proposals from each of the seven companies on the matter of compensation, and after he reviewed them, he took specific actions to correct their flaws.
“I requested and received comprehensive submissions from each of the seven companies, explaining their view on what they thought they needed for their top 25 officials in the way of a comprehensive package. I examined those submissions with the utmost care and scrutiny, and I concluded that six of the seven submissions…were contrary to the statute, contrary to the regulations, and contrary to the public interest,” he said.
Feinberg clarified his remarks by stating that certain of the companies “wanted too much cash guaranteed salary…and made no mention of the perks that were part of their salary.”
Feinberg said that his office evaluated the submissions and made some material changes.
“First we greatly reduced the amount of cash that would be available to the senior officials. Second, they required that when they issue stock, that stock may not be cashed out for up to four years. Third, we said no more unlimited perks. Perks are limited to $25,000 per individual, and anymore than that would have to be approved by the Office of the Special Master,” he said.
by Julianne LaJeunesse- University of New Mexico
Should the Federal Reserve Committee be regulated by the Government Accountability Office? U.S. Representative Ron Paul (R-Texas) says yes, and Scott G. Alvarez of the Federal Reserve says no.
Paul is the sponsor of H.R. 1207, which calls for audits on the Federal Reserve, a quasi-public entity that in theory can control the nation’s money supply, set interest rates, and implement monetary policy.
At a Friday hearing, Paul said the Fed needs GAO oversight because they aren’t doing their job correctly.
“The Federal Reserve was designed, and their mandate was to make sure that we have full employment, price stability, and stable interest rates,” Paul said. “In my lifetime, interest rates have been 21 percent and less than one percent- so they fail there. They [the Fed] want a stable dollar and stable prices… well, we have continuous inflation.”
Paul said it’s Congress’ responsibility to make sure the Fed does what it was created for and not buy into the idea that the Fed needs more power and more secrecy.
Fed Board of Governors General Counselor Scott G. Alvarez argued before Paul, Chairman Barney Frank (D-Mass.), and other members of the House Financial Services Committee, saying that Fed autonomy is instrumental in safeguarding U.S. interest rates, but also that an independent Fed is a nonpolitical Fed.
Alvarez said from an economic stance, GAO regulation would hinder Fed access to and implementation of some programs.
“If it looks like the Federal Reserve is changing directions because a statement [of] the policy review by another agency is influencing the Federal Reserve’s decision… then the integrity of the process will be undermined, confidence that the Federal Reserve will move in the direction that is best for the economy will be undermined, and we won’t be able to carry out our job as well,” Alvarez said. “And that’s what we’re concerned about.”
Alvarez said the Fed has taken many steps to increase transparency since the 2008 bank bailouts, but when Rep. Emanuel Cleaver II (D- Mo.) asked him about the misinterpretation between Congress and the Treasury Department and the Federal Reserve, as far as Troubled Assets Relief Program allocations, Alvarez said the latter departments decided to use the funds to restore confidence to banking institution, a decision Cleaver said was not immediately apparent when TARP was passed.
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.
Chair of the Congressional Oversight Panel Elizabeth Warren, says she sees no plan on whether or not TARP will be extended one more year. (0:45)
By Mariko Lamb
Rep. Cathy McMorris Rodgers (R-Wash.) unveiled a new GOP website Thursday that “shines the light on government spending.” Sunshine.gop.gov tracks stimulus project spending, earmarks, TARP programs, and transparency legislation.
“We thought it was important that taxpayers actually be able to see exactly how every dollar was being spent,” she said. “Sunshine.gop.gov will give taxpayers greater insight and ultimately hold the federal government accountable for how it spends our tax dollars.”
The site is more user-friendly and cost-effective than Recovery.gov, she said. Development of sunshine.gop.gov cost only $20,000 as opposed to the recent $18 million contract signed to update the administration’s stimulus site, Recovery.gov.
Rodgers urged both the public and the media to use the website as a tool to conduct research on government spending and pursue stories on wasteful government spending.
“We’re making a transition as far as using new media [and] the internet. It’s impacting the way we communicate as a society, but its also is impacting the way people get information,” she said. “This is a step in the right direction.”
Rep. Barney Frank (D-Mass.) says he longs for the “good ole days when I thought TARP is what you used to cover up the infield whenever it was raining.” Frank made the remark during a discussion of financial regulatory reform at a National Press Club luncheon. (0:05)
