Wednesday, December 3, 2008

You Mean We Were Supposed to Track Those Loans?

What a surprise! From the BBC News (of course) we learn that: The "$700bn bail-out of the US banking system is being carried out without adequate oversight, according to the General Accounting Office (GAO)." The telling paragraphs reveal that (emphasis marks and some editing was necessary - Ed.):

. . . the GAO report says that the Treasury "has no policies or procedures in place for ensuring the institutions . . . . are using the capital investments in a manner that helps meet the purposes of the act." The GAO pointed out that the major banks had told them that the government investment would not be viewed any differently from other capital, and used to "strengthen their capital base, make acquisitions, and lend to individuals and businesses." And it questions whether the Treasury has even been able to monitor the actions of the banks. It also points out that no bank had been refused access to funds.
This is not incompetence, folks. This is purposive public theft - from you and your heirs forever. Read it and weep. And thank BBC News for the first factual reporting we have received since October.
The Congressional watchdog says that the U.S. Treasury is failing to monitor whether banks have complied with requirements on executive pay. And it says the U.S. Treasury failed to address "critical issues" when it changed the goals of the rescue plan. Congress approved the controversial bail-out package in early October. At that time, U.S. Treasury Secretary Henry Paulson said that the $700bn would be used to buy up troubled mortgage assets from the banks. But shortly afterwards, he decided that the money would be better spent by providing additional capital directly to the banks. So far, over $150bn has been invested by government in the purchase of preferred shares, including taking a $115bn stake in eight major national banks, and smaller stakes in 44 other banks. The Treasury said its objective was to stabilise the financial system and increase the flow of funds for lending. But the GAO report says that the Treasury "has no policies or procedures in place for ensuring the institutions... are using the capital investments in a manner that helps meet the purposes of the act." The GAO pointed out that the major banks had told them that the government investment would not be viewed any differently from other capital, and used to "strengthen their capital base, make acquisitions, and lend to individuals and businesses." And it questions whether the Treasury has even been able to monitor the actions of the banks. It also points out that no bank had been refused access to funds. "The rapid pace of implementation and evolving nature of the programme have hampered efforts to put a comprehensive system of internal control in place," the GAO report said. But Neel Kashkari, the head of the Treasury bail-out programme, said there was no need to monitor how individual banks were spending the funds and added that "the Treasury has made significant efforts to ensure transparency and good communication." Mortgage defaults The GAO acknowledges that measuring the impact of the programme on credit markets will be "challenging" as there have been a variety of actions taken to stabilise the financial system, both in the U.S. and abroad. However, it says that there are a number of indicators which should "signal whether [it] is functioning as intended", including interest rate spreads, mortgage rates, mortgage originations, and foreclosures. So far, none of these indicators has turned positive. It points out that in addition to the Treasury bail-out, the Federal Reserve has provided around $900bn in credits to banks and purchased $500bn in mortgage-backed securities issued by the government-backed mortgage lenders Fannie Mae and Freddie Mac. 'Discouraging report' In relation to reducing the number of foreclosures, which was one of the explicit Congressional goals of the bail-out, the GAO says that so far the Treasury has "not announced any specific programmes" despite its assertion that it will work with lenders "to achieve aggressive loan modification. The lack of progress on providing more help to homeowners has been deeply upsetting to Congress, which recently held hearings on the matter. "The GAO's discouraging report makes clear that the Treasury Department's implementation of the [programme] is insufficiently transparent and is not accountable to American taxpayers," said House Speaker Nancy Pelosi. Congress has also established a special five-member oversight panel to monitor the bail-out, which is headed by Harvard Professor Elizabeth Warren. It plans to issue its first report on 10 December. In an interview with the New York Times, Professor Warren also expressed scepticism about the shifting approach of the programme. "You can't just say, 'Credit isn't moving through the system,'" she said in her first public comments since being named to the panel. "You have to ask why." The severe financial crisis that is rocking global markets at the moment began more than a year ago with rising defaults on sub-prime mortgages, loans provided to borrowers with weak credit histories. Since then, the U.S. economy has plunged into recession, and credit available to individuals and businesses has been severely reduced.
It seems almost ridiculous at this point to need to point out this report's inadequacy, but I have to ask how do the people in charge of the U.S. Treasury get away with exhibiting no real concern for the mandated reporting function and the legal requirement for "transparency?" Or at least that's what I learned in Business school. Suzan _____________________

2 comments:

Serving Patriot said...

Suzan,

Public theft is about the best description possible.

Of course, those "responsible" officials will get away with it because Congress simply refuses to impeach any of them for their gross negligence.

The first impeachment trials could have been held in October 2001. (And if it had been President Al Gore, I have little doubt that they would have been held.) When you can get away with the monstrous negligence that failed to protect the country, lie your way into a war, shred the Constitution, sink the country's reputation, lose the wars you start (and can't stop) and permit wholesale politicization of justice, then why should you worry about simple theft from the public treasury?

SP

Suzan said...

You know I agree with your every word, SP. Nice summary.

But if it had been President Al Gore, I'll make you a bet that we wouldn't have had 9/11 or any of its concurrent and succeeding nightmare scenarios.

Imagine (h/t John Lennon)!

All I ever think about now (at the end of our national prestige), is how easy this was to foresee from the first reporting of the Presidential orders/statements emanating immediately after 9/11 - every one already formulated by the AIPAC bully team and ready to go as soon as the explosions got loud enough.

And it's not like plenty of smart people didn't see this coming down the tracks. You can't even blame the Cheneyites for this fifth column's unblinking acceptance and cowardice. Yes, I think they were/are all witting traitors.

I only wish voting for a black man for President had been a magic bullet. It seems not.