Transparency for TARP and Funds for Foreclosed Properties

Time icon July 27th, 2009 by Autor Joseph Smith

A bill calling for a higher level of transparency in the disbursement of trillions in Troubled Asset Relief Program funds and the disbursement’s ultimate effects on the federal program to contain foreclosed properties has been launched in the House by Special Inspector General Neil Barofsky and has been supported by a group of lawmakers.

Barofsky said that the Treasury Department has failed to allocate TARP funds with the level of transparency and accountability satisfactory to the public.

Critics of how TARP was implemented also said that the U.S. Treasury and Federal Reserve granted trillions in taxpayer money to big banks and corporations without reporting details to the public.

New York Democrat Edolphus Towns, chairman of the House Committee on Oversight and Government Reform, called on the Treasury to put more detailed information on its official web site. Towns even warned that Secretary Geithner can be called upon by the House committee to explain if he does not provide details on how TARP was spent. Lawmakers also want to know how the disbursements helped facilitate the federal program to address foreclosed properties.

When Federal Reserve Chairman Ben Bernanke spoke before a House Committee recently, Florida Republican Representative Bill Posey remarked that Americans have the right to know 100 percent of how the TARP funds were being spent.

Bernanke reported that all the actions carried out by the Federal Reserve in the past several months helped prevent the total collapse of the American and global financial systems. He said the economic problems faced by the U.S. in September and in October last year were the worst combination of problems since the recession in the 1930s.

Bernanke said the Fed granted a total of $1.5 trillion in short-term emergency loans in 2008 to the country’s largest banks and other financial corporations to prevent the financial sector’s total collapse. But he emphasized that the current level of loans to the big banks has now gone down to $600 billion.

Bernanke also acknowledged that problems remain because of the rising unemployment rate and the continued rise in foreclosed properties.

He also admitted that credit remains tight and this has led to a rising number of foreclosed properties in the commercial real estate sector.

Additionally, Barofsky said his office examined 360 banks to check how they spent their TARP allocation and found out that most of them used the money to pay debts and buy other banks instead of opening up lending to troubled business owners and homeowners to help contain the effects of foreclosed properties.

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