While some Americans were taking out small payday loans just to buy groceries, the U.S. government approved a plan to give the Treasury $700 billion to resolve the housing crisis. Now a congressional watchdog panel is saying the Treasury has done nothing to ensure the money was used to stabilize the mortgage crisis.
The Troubled Asset Relief Program was meant to aid homeowners in avoiding preventable foreclosures, the panel says, and there is no evidence that the bailout money went toward that effort.
Poor bookkeeping
The $700 billion program, TARP, was approved in mid-October. The oversight panel, headed by Elizabeth Warren, says the Treasury hasn’t even released a strategy for stabilizing the financial system.
“Treasury needs to be clear as to what, if anything, it has done,” Warren said.
Warren says Congress gave $350 billion to the Treasury and specified it was meant to help borrowers refinance their homes. The Treasury set up the system and did not put in place a tracking mechanism to monitor whether it was meeting Congress’ requirements. Homeowners, with mortgages that exceed the value of their homes, may still be taking out payday loans to pay their mortgage so they don’t get thrown out of their houses.
The other half
In order to access the other $350 billion, the Treasury needs congressional approval. Whether the Treasury requests these funds remains to be seen. And whether they receive the funding will be up to the discretion of President-elect Obama’s administration. Obama’s economic team is now overhauling the remaining fund to speed the flow of credit to consumers.
The initial deadline for approval for bailout money was Dec. 31. The Treasury has extended the deadline to Jan. 15, five days before Obama’s inauguration. This gives regulators extra time to process and approve requests, and it potentially gives more financial institutions time to apply for funding. So it will likely be a while before we find out just exactly what the Treasury did with the money.
Hello? Anybody home?
To aid in drafting its report, the panel had submitted 45 questions to the Treasury. Several of the questions were not answered, according to the panel.
A Treasury spokesman gave no comment in response to the panel’s report, which was released today. He said he had not seen it.
Keeping an eye out
The Treasury apparently has nothing to say in response to the report at the moment, but sometimes these things take time. I’ll be watching the news for a response, so check back for updates.
My thoughts? It may be too late for the bailout funds to help average Americans keep their homes. Sure, home foreclosures have gone down since TARP was approved, but is that just because so many people have already been kicked out? The funding still may be able to help some people, but now that the deadline to approve institutions for funds has been extended, there are probably some panicked homeowners out there taking out payday loans so they can pay their overpriced mortgages.
Not very much thought was put into how the money was to be spent. As a result it seems that it was a farce. They need more checks and balances to assure it will go where intended.
It seems the treasury is taking it’s cues from Rod Blagojevich and Wall Street. Did the American people miss the memo where our officials don’t have to be accountable for their actions anymore?
The Tarp fund was enacted to quickly and was never thoroughly thought through. It is a great idea to help out financial institutions with extra money but they got money to quickly and didn’t need to prove where or how they were spending the funds.