Government Accountablity Office has just published its take on the Tarp, which can be summed up in ten of the GAO’s own words: “Additional Actions Needed to Better Ensure Integrity, Accountability, and Transparency”.
The GAO report is a multi-pronged review, covering:
the activities that have been undertaken through TARP as of November 25, 2008; the structure of OFS, its use of contractors, and its system of internal controls; and preliminary indicators of TARP’s performance.
In other words, it’s a long, dense document (running to 72 pages). We’ve read it, so you don’t have to.
Methodology:
GAO reviewed documents related to TARP, including contracts, agreements, guidance, and rules. GAO also met with OFS, contractors, federal agencies, and officials from some participating institutions.
The Treasury must:
work with the bank regulators to establish a systematic means of determining and reporting in a timely manner whether financial institutions’ activities are generally consistent with the purposes of CPP and help ensure an appropriate level of accountability and transparency
develop a means to ensure that institutions participating in CPP comply with key program requirements (e.g., executive compensation, dividend payments, and the repurchase of stock)
formalize the existing communication strategy to ensure that external stakeholders, including Congress, are informed about the program’s current strategy and activities and understand the rationale for changes in this strategy to avoid information gaps and surprises
facilitate a smooth transition to the new administration by building on and formalizing ongoing activities, including ensuring that key OFS leadership positions are filled during and after the transition
expedite OFS’s hiring efforts to ensure that Treasury has the personnel needed to carry out and oversee TARP
ensure that sufficient personnel are assigned and properly trained to oversee the performance of all contractors, especially for Contracts priced on a time and materials basis, and move toward fixed-price arrangements whenever possible
continue to develop a comprehensive system of internal control over TARP, including policies, procedures, and guidance that are robust enough to protect taxpayers interests and ensure that the program objectives are being met
issue final regulations on conflicts of interest quickly and review and renegotiate mitigation plans to enhance specificity and compliance
institute a system to effectively manage and monitor the mitigation of conflicts of interest
That is quite a list, and reviewing it does little to inspire confidence in the Treasury’s initial plan. The GAO is saying, in effect, that Paulson, Kashkari et al need to sit down and seriously think through some quite fundamental issues.
An assessment with which the Treasury largely agrees:
In written comments, Treasury generally agreed with the report and eight of the nine recommendations
The point of dissension? Per Neel Kashkari’s response via letter, included in the GAO report, the Treasury has a “different perspective on what is needed to evaluate how individual institutions participating in the CPP are spending the funds they receive under the program.”
The GAO, for its part, “believes that monitoring aggregate information across the participants would help ensure an appropriate level of transparency and accountability.”
At least interim assistant secretary Kashkari is open to suggestions, noting that the Treasury “welcomes further discussion on general metrics for evaluating the overall success of the capital purchase program.”
“We believe that Treasury has made significant efforts to ensure transparency and good communication with our external stakeholders, but more can and will be done in these areas,” he added.
Which is helpful, since:
GAO plans to continue to monitor these and other issues including future and ongoing capital purchases, other transactions undertaken as part of TARP (e.g., capital purchases in Citigroup and American International Group), and the status of other aspects of TARP.
Actually, we take it back. You should read the report in full, because it provides a wealth of detail on the various acronyms currently deployed to save the financial world, as well as lots of useful numbers (like table 1: “Amount of Capital Investment and Characteristics of the Qualified Financial Institutions Participating in the Capital Purchase Program, as of November 25, 2008″).
To say nothing of the cool graphics, like this one on page 29:
No MS Paint for the GAO, then.