Remember back in September when Congress blocked the Bush administration's initial effort to ram through a bailout bill that would have given Treasury Secretary Hank Paulson virtually unlimited authority to spend $700 billion however he saw fit?
Among the measures that Congressional Democrats successfully held out for -- against the wishes of the White House -- were meaningful oversight mechanisms that would allow Congress and others to track what the Treasury Department is doing with all that money.
That seemed like a victory for taxpayers at the time. But now, over two months later, we've learned a bit about what those oversight mechanisms have been able to provide. And there's real reason to question whether in fact they were designed adequately for the task in the first place.
"It's a mess," Eric M. Thorson, the Treasury Department's inspector general, told the Washington Post last month. "I don't think anyone understands right now how we're going to do proper oversight of this thing."
Perhaps the single biggest obstacle to adequate oversight of Treasury is how little oversight Treasury itself is exercising over the bailout funds, whether through indifference or an inability to hire qualified staff. In the first report issued by the Congressional Oversight Panel (COP) -- the main oversight mechanism that Congress fought to include in the bailout bill, over Paulson's objections -- the authors made clear that they were concerned about Treasury's lack of tracking mechanisms: "Treasury cannot simply trust that the financial institutions will act in the desired ways; it must verify." But COP also suggested that it was prevented from going further by the fact that Treasury wasn't keeping extensive enough records of its allocation of funds to be able to provide much more information.
A different overseer, the Government Accountability Office -- which functions as the investigative arm of Congress -- drew similar, albeit somewhat firmer, conclusions about Treasury's handling of the bailout money. Its preliminary report last week found a litany of problems, perhaps most fundamentally that there were no procedures to ensure that bailout funds are used as intended.
Just as important, the system of oversight doesn't appear to have been set up under conditions that would have allowed it to function effectively. With just three paid staff members (who started only this week -- two days before the panel's first report was to be released), COP was still struggling to get office space as it was preparing the report. Warren confirmed in an email to TPMmuckraker that "time constraints" had played a role in limiting the scope of the report's conclusions, saying that the panel met for the first time only two weeks ago.
Congress dragged its feet in naming the panel's members: although the bailout bill was passed in early October, they weren't named until mid-November. And it hasn't helped that Senate GOP leader Mitch McConnell still hasn't named a replacement for Sen. Judd Gregg, who stepped down last week as one the panel's two Republicans, saying he was too busy.
Still, at least GAO and the Congressional panel have been in place long enough to offer those reports. The single person who's most directly responsible for overseeing Treasury's bailout spending, Special Inspector General for the bailout, Neil Barofsky, was only confirmed this week. That's because one unnamed Republican senator -- it now seems all but certain that it was Kentucky's Jim Bunning -- placed a hold on Barofsky's nomination.
Congress may be talking belated steps to fix the problem. The Senate yesterday passed a bill that would let Barofsky investigate any use of bailout funds that he deems questionable, and hire auditors for the job. And the House has passed an amendment to the auto bailout bill that would require banks to say more about what they're doing with the TARP money.
Still, it appears that the rush to take action affected not just Treasury -- which was clearly scrambling to set up the bailout program without adequate record-keeping -- but also Congress, which failed to ensure that the oversight system it set up was designed as effectively as it needed it to be. And much of the damage may already have been done.