Congress wants answers on bailout

House panel will hear testimony from Treasury, key bailout oversight administrators on government's handling of funds.

EMAIL  |   PRINT  |   SHARE  |   RSS
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all RSS FEEDS (close)
By David Goldman, staff writer

Can the markets sustain a stock rally through the end of the year?
  • Yes
  • No
Tracking the bailout
Who's getting the bank bailout money
The government is engaged in an unprecedented - and expensive - effort to rescue the economy. Here are all the elements of the bailouts.

NEW YORK ( -- Before Congress put the Treasury Department in charge of $700 billion of financial rescue funds, it mandated several stringent measures to ensure the money would be used for its intended purpose.

Six weeks later, Treasury is coming under increasing fire on Capitol Hill for how it is implementing the Troubled Asset Relief Program.

Next up, the House Financial Services Committee will hear testimony on Wednesday from bailout point man Neel Kashkari, Acting Comptroller General Gene Dodaro and two members of a congressional oversight panel: Harvard law professor Elizabeth Warren and Rep. Jeb Hensarling, R-Texas.

The hearing will serve as a follow-up to a Government Accountability Office report delivered to Congress last week and a Congressional Oversight Panel review set to be delivered to lawmakers Wednesday. On Monday, the Senate confirmed a former federal prosecutor, Neil Barofsky, whose job it will be to ensure that the program is not tainted by corruption.

The Wall Street Journal reported on its Web site on Tuesday that the yet-to-be-released oversight panel report will harshly criticize Treasury's lack of accountability and clear direction for its bailout program.

Similarly, the GAO report said Treasury has yet to address "critical" oversight issues to ensure the plan is working. The study found that the Treasury program needs more staff, better management, an improved transition effort and facilities to ensure banks are using bailout funds effectively.

Lawmakers on both sides of the aisle used the report as a launching pad for criticism of the Treasury's handling of the bailout so far.

Democrats, including House Speaker Nancy Pelosi, D-Calif., Senate Banking Committee Chairman Christopher Dodd, D-Conn., and House Financial Services Committee Chairman Barney Frank, D-Mass., focused their ire on the lack of Treasury's commitment to foreclosure reduction and troubled homeowner assistance.

"Adding this blatant refusal to enforce any lending obligations on individual intuitions the continued policy of ignoring the clear intent of the EESA to aid in the reduction of foreclosures put the Treasury perilously close to a breach faith with those who responded to the Bush Administration's request to establish the program," said Frank in a statement.

Republican House leaders, including Minority Leader John Boehner, R-Ohio, lambasted Paulson for shifting strategies from mortgage-backed securities purchases to capital investments. They said Treasury needs a clear outline for use of the funds before lawmakers will hand out the remaining balance.

"Such opaqueness is unacceptable, particularly if it is your intention to ask Congress to release the remaining $350 billion in taxpayer funds that were conditionally authorized by Congress this fall," Republican congressional leaders in a statement.

First batch of funds running dry

With just $15 billion of the first $350 billion of Troubled Asset Relief Program funds left unallocated, some political analysts expect Secretary of the Treasury Henry Paulson to ask for the second half of the $700 billion bailout.

But to get the remaining balance, Paulson will have to convince Congress the financial sector needs it -- and that the Treasury will use the funds appropriately. That may be difficult with the increasing criticism the Treasury has faced from lawmakers.

After the Emergency Economic Stabilization Act was signed into law Oct. 3, Paulson immediately received $250 billion with which to work. The next $100 billion came on Oct. 14, when President Bush asked Congress for the next batch of funding.

Thus far, the bulk of the first $350 billion has been allocated for capital investments in banks. Of the $250 billion allocated, the Treasury has sent out more than $161 billion in checks to 52 banks in exchange for preferred shares and a high dividend.

Treasury has also sent $40 billion to AIG as part of the insurer's $152 billion bailout, allocated $20 billion for an additional capital investment in Citigroup and set aside $20 billion to backstop losses from a separate Federal Reserve plan to buy up debt backed by consumer loans.

That leaves little leeway left to help avert disaster, as Treasury did with Citigroup's second emergency loan a week before Thanksgiving. To top of page

They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
More Galleries
10 of the most luxurious airline amenity kits When it comes to in-flight pampering, the amenity kits offered by these 10 airlines are the ultimate in luxury More
7 startups that want to improve your mental health From a text therapy platform to apps that push you reminders to breathe, these self-care startups offer help on a daily basis or in times of need. More
5 radical technologies that will change how you get to work From Uber's flying cars to the Hyperloop, these are some of the neatest transportation concepts in the works today. More

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.