The Islamic Post Blog

Oversight Panel: Where is the $700 Billion? by Khalida
January 2, 2009, 8:17 am
Filed under: January Volume I- 2009, National | Tags:

Since the passage of the Emergency Economic Stabilization Act of 2008 to the present date, the U.S. Treasury Department [henceforth known as “Treasury”] has used its authority under the Act to provide 87 banks with $165 billion in exchange for preferred stock and warrants. Treasury further used its authority to provide AIG with $40 billion in exchange for preferred stock and warrants, and to provide Citigroup with a further $20 billion in preferred stock and warrants. As part of a program to guarantee approximately $306 billion in Citigroup’s troubled assets, Treasury receives $4 billion of Citigroup preferred stock and warrants. Together, these disbursements constitute approximately $1,900 per American family, or almost 3% of the typical family’s pre-tax income.
The following are excerpts from the first report of the Congressional Oversight Panel:
“We are here to investigate, to analyze and to review the expenditure of taxpayer funds. But most importantly, we are here to ask the questions that we believe all Americans have a right to ask: who got the money, what have they done with it, how has it helped the country, and how has it helped ordinary people?
[The panel presented ten questions, which have been abbreviated as follows:]
1. What is Treasury’s Strategy? What does Treasury think the central causes of the financial crisis are and how does its overall strategy for using its authority and taxpayer funds address those causes?
2. Is the strategy working to Stabilize Markets? What specific metrics can Treasury cite to show the effects of the $250B spent thus far on the financial markets, on credit availability, or mostimportantly, on the economy?
3. Is the strategy helping to reduce foreclosures? What steps have Treasury taken to reduce foreclosures and have those steps been effective?
4. What have financial institutions done with the taxpayers’ money received so far?
5. Is the public receiving a fair deal? What is the value of the preferred stock Treasury has received in exchange for cash infusions to financial institutions?
6. What is Treasury doing to help the American family? Does Treasury believe American families need to borrow more money? Have Treasury’s actions preserved access to consumer credit, including student loans and auto loans at reasonable rates?
7. Is Treasury imposing reforms on financial institutions that are taking taxpayer money? Congress has told the auto industry to reform its current practices before it could be considered for taxpayer aid and the British are requiring reforms on their banks as a precondition for capital infusions. Has Treasury required banks receiving aid to:
Present a viable business plan;
Replace failed executives and/or directors;
Undertake internal reforms to prevent future crises, to increase
oversight, and to ensure better accounting and transparency;
Undertake any other operational reforms?
8. How is Treasury deciding which institutions receive the money? What factors is Treasury using to determine which institutions receive equity infusions, purchase of portfolio assets, or insurance of portfolio assets? Is Treasury seeking to use TARP money to shape the future of the American financial system, and if so, how?
9. What is the scope of Treasury’s statutory authority? What is Treasury’s understanding of the statutory limits on its use of funds? How does Treasury justify its decisions under the Act in relation to its view of these limits? How is Treasury carrying out its statutory
mandate regarding credit insurance?
10. Is Treasury looking ahead? What are the likely challenges the implementation of the Emergency Economic Stabilization Act will face in the weeks and months ahead? Can Treasury offer some assurance that it has worked out contingency plans if the economy suffers further disruptions?
The above questions, in greater detail, formed the heart of the report, which was issued two weeks after the Oversight Panel’s first meeting. The report did not attempt to answer the questions Congress and the American people have about the use of the powers granted to Treasury under the Emergency Economic Stabilization Act of 2008. Rather, it sought to pose those questions clearly in the context of the events that have occurred since the adoption of the Act in October. It was the intent of the authors to set the agenda for our future work and to advise the Congress as to the issues that it will need to address in the next Administration.
-This report was compiled by Aisha Spencer


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