The Treasury Department had originally intended that the $700 billion of TARP bailout money would go to buying up the bad assets of banks and other financial institutions. But then, as was widely reported, Treasury Secretary Hank Paulson reversed course last month and announced that he would take an entirely different approach, using the money simply to inject new capital into troubled banks.
What have we lost through this flip-flopping? It’s impossible to know for sure, but one line from a Tuesday New York Times report offers a hint. The paper notes an interesting finding in an audit of the rescue plan, conducted by the Government Accountability Office:
Treasury already had hired staff members for the initial mission, some of whom were not necessary or best suited for the work required under the new strategy.
So have new staff members, who have specific expertise in the issues involved in the new strategy, now been hired? Or is Treasury assigning the crucial task of rescuing the nation from financial collapse to staffers who aren’t the best people for the specific job? We’d love to know.
The rest of the expected contents of the GAO report are hardly more encouraging. The Times says the report “is expected to be critical of the Treasury Department’s failure to set up ways to track how its bailout money is being used in the marketplace.”
It’s also “likely to call for tighter controls over the conflicts of interest that are arising as financial specialists, institutions and law firms are hired for Treasury work that could later aid their private-sector clients.”
Both of these potential problems have been highlighted by members of Congress and others in recent weeks.
More on this when the report is officially released next week…
