House Dems Take On Geithner Over Bailout Funds

House Dems Take On Geithner Over Bailout Funds

Congress is getting tired of asking nicely. Twenty House and Senate Democrats sent a letter to Treasury Secretary Timothy Geithner in May asking if he intended to implement the recommendations of bailout auditors. They never heard back.

If there's one thing that gets under the congressional skin, it's being ignored. So they're responding with an attempt to make it a legal requirement for Geithner to either accept the reform and oversight recommendations or explain to Congress why he won't.

The move represents an escalation in the tussle over the bailout between the White House and Democrats in Congress, and it's likely to pass.

Later this week, the full House will vote on whether to give Geithner a deadline written into the law to respond to its request. The mandate passed the Appropriations Committee last week. The first legally required report would be due Sept. 1, 2009, with quarterly reports to follow.

Geithner is required to respond to auditors' recommendations under current law, but there is no deadline to do so. Geithner neither replied to the May letter, nor has he responded to the recommendations of the Government Accountability Office (GAO) or the Special Inspector General for the Temporary Asset Relief Program (SIGTARP).

The spring letter was drafted by Rep. Maurice Hinchey (D-N.Y.), who also pushed the follow-up measure through the appropriations committee with the help of Rep. Jose Serrano (D-N.Y.), chairman of the subcommittee on Financial Services and General Government.

Nineteen other members of the House and Senate signed the letter, which rebuts a Treasury claim that it would be too difficult to track how the money is being spent. "The lack of transparency, accountability, and susceptibility of fraud in these programs could prevent the financial recovery that is sought from the 12 programs under TARP," the members of Congress told Geithner. "Treasury's arguments that such an accounting was impractical, impossible, or a waste of time because of the inherent fungibility of money were unfounded."

Rather than respond to the congressional request, the department has suggested that SIGTARP might not be an independent auditor but is rather subordinate to Treasury.

The measure -- included in the Financial Services and Government Appropriations bill for fiscal year 2010 -- is headed to the Rules Committee Monday night and will likely hit the floor for a full vote this week, where it is expected to pass.

The letter that started the fight is below:

May 21, 2009

The Honorable Timothy F. Geithner
U.S. Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, D.C. 20220

Dear Secretary Geithner:

We write to you today to urge you to provide full accountability and transparency of funds distributed to financial institutions through the 12 programs under the Troubled Asset Relief Program, as recommended by the Special Inspector General of the TARP (SIGTARP) in his second Quarterly Report to Congress released on April 21, 2009.

The first set of recommendations that we would like to bring to your attention address the Treasury Department's role in facilitating compliance and oversight of all funds distributed for financial recovery. According to the SIGTARP, your department has indicated that it would not adopt recommendations to require recipients of government funds to "account for the use of TARP funds, set up internal controls to comply with such accounting, and report periodically to Treasury on the results, with appropriate sworn certifications." While your agency said such oversight would not be possible, the office of the SIGTARP proved otherwise; collecting information on how the funds were used from all 364 TARP recipients that received funds prior to January 31, 2009. The second Quarterly Report to Congress noted:

Although the results of the survey still need to be analyzed, one thing is clear: Treasury's arguments that such an accounting was impractical, impossible, or a waste of time because of the inherent fungibility of money were unfounded. Banks generally provided a reasonable level of detail regarding their use of TARP funds, and, while the response quality was not uniform, some banks were able to provide detailed, at times even granular, descriptions of how they used taxpayer money.

We urge you to reconsider these recommendations and adopt them.

Secondly, the SIGTARP's report reiterates a recommendation from the first Quarterly Report to Congress from the SIGTARP to the Capital Assistance Program (CAP). The program currently requires applicants to detail their plans to use the funds, but requires no report on how the funds were actually used. We believe you should adopt the SIGTARP's recommendation to require reporting from applicants on how they used the funds.

Finally, the SIGTARP provides new recommendations for the Public-Private Investment Program (PPIP) in order to prevent conflicts-of-interest, collusion, and money laundering. Before this program is instituted, we believe that it is absolutely critical that you put the measures in place to follow the SIGTARP's recommendations so that this program does not become susceptible to opportunities for misconduct as highlighted by the SIGTARP.

You have inherited the most serious financial and economic crisis our country has faced since the Great Depression and we want to do all we can to assist you and the administration to put the U.S. economy on the road to recovery. As part of this, we believe it is critical to follow all of the SIGTARP's recommendations, particularly those mentioned in this letter. The transparency and accountability of these programs have a direct impact on the confidence that the American people have in their government. The lack of transparency, accountability, and susceptibility of fraud in these programs could prevent the financial recovery that is sought from the 12 programs under TARP.

Thank you for all of your efforts and leadership through this grave economic crisis. We look forward to hearing your response regarding your commitment to implementing the SIGTARP's recommendations.

Joining Hinchey in sending the letter to Secretary Geithner were: U.S. Senator Tom Harkin (D-Iowa), U.S. Senator Bernie Sanders (I-Vt.), Congressman John Boccieri (D-Ohio), Congressman Christopher Carney (D-Penn.), Congressman Elijah Cummings (D-Md.), Congressman Peter DeFazio (D-Ore.), Congressman Keith Ellison (D-Minn.), Congressman Charlie Gonzalez (D-Texas), Congressman Alan Grayson (D-Fla.), Congressman Raul Grijalva (D-Ariz.), Congressman Steve Israel (D-N.Y.), Congresswoman Marcy Kaptur (D-Ohio), Congressman Daniel Lipinski (D-Ill.), Congressman Eric Massa (D-N.Y.), Congresswoman Carol Shea-Porter (D-N.H.), Congressman Harry Teague (D-N.M.), Congressman John Tierney (D-Mass.), Congressman Peter Visclosky (D-Ind.), and Congressman Peter Welch (D-Vt.).

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