Update (at bottom): White House does not know how TARP funds were used
House Domestic Policy Subcommittee plans probe of TARP funds
Ohio Democratic Congressman Dennis Kucinich wants to know: “If [the Troubled Asset Relief Program] isn’t about keeping people in their homes or providing credit to businesses, what is it for?”
Expressing his frustration before the Government and Oversight Committee, the two-time presidential candidate suggested that the Federal Reserve may be paying banks to hoard money and avoid making loans.
Before the committee — which assembled Tuesday to hear the testimony of Neil Barofsky the Special Inspector General for TARP, along with Federal Reserve Chairman Ben Bernanke — Kucinich wondered aloud if “banks are parking a historic amount of taxpayers’ money in the Federal Reserve while the businesses and consumers across America are starved for credit,” and whether the Federal Reserve is paying banks to avoid making loans.
“Is the Fed paying banks NOT to loan money?” a Kucinich media advisory pondered.
To support his line of questioning, he cited a Bloomberg report which noted that “banks’ excess reserves at the Fed rose to a record $877.1 billion daily average in the two weeks ended May 20, from $2 billion a year earlier.
“Excess reserves — money available for lending that banks choose to leave with the Fed instead — averaged $743.9 billion in the first two weeks of this month,” the report continued.
“First, Congress was told that TARP was for the purchase of toxic assets, to help keep people in their homes,” the Congressman said. “Then the Bush Administration switched the program. Next, Congress was told that the TARP funds were instead needed to bail out the banks, in the form of a direct capital infusion, to keep credit markets alive.”
He continued: “If TARP isn’t about keeping people in their homes or providing credit to businesses, what is it for? I think the vast majority of Americans would be outraged to learn their tax dollars were facilitating hoarding at the Fed and increased profit making for banks.”
In his testimony, Bernanke said the pace of America’s economic decline seems to have slowed, but he expects continued unemployment near 10 percent of the population through the end of 2010.
“The weak job market in the United States, coupled with falling home prices and tight credit, he said, are putting downward pressure on households, undermining ‘the recent stabilization in household spending,’” according to The New York Times.
Increased oversight soon?
Kucinich said the House Domestic Policy Subcommittee will probe how the $700 billion in troubled asset relief funds were used, in light of the Fed’s nondisclosure. It will not be the first time the nation’s largest bank has faced efforts to increase oversight of its policy decisions and accounting.
In a letter to Bernanke regarding the use of TARP funds for a $3.6 billion bonus package given out to Merrill Lynch & Co. employees, Kucinich insisted that “[the] answers the Subcommittee seeks will be of interest to the American public, who are rightly concerned about how recipient firms have used TARP monies, and how well the Federal Government has monitored the use of those funds and safeguarded them from waste and abuse.”
Bernanke told the panel in late June that the Federal Reserve “acted with the highest integrity throughout its discussions with Bank of America regarding that company’s acquisition of Merrill Lynch.”
Republican Congressman Ron Paul of Texas has, in particular, been a thorn in the side of the bank which controls America’s currency. His bill, House Resolution 1207, which would audit the Fed, has garnered 274 co-sponsors: “[Every] House Republican and almost 100 Democrats — and counting,” noted The Wall Street Journal.
“Although Federal Reserve officials regularly explain the rationale for their policy decisions in public venues, the process of vetting ideas and proposals, many of which are never incorporated into policy decisions, could suffer from the threat of public disclosure,” Federal Reserve deputy chairman Donald Kohn argued earlier this month.
“The big guns are coming out now,” said Congressman Paul in a recent video update. “They are trying to line up the establishment economists and other business people to warn people about the great danger of the American people finding out who’s benefiting from the behind the doors, seeing the activities of the Federal Reserve.
“I think it’s going to be impossible for them to ignore everything we’ve done and just walk away,” he said.
Update: White House does not know how TARP funds were used
During Tuesday’s White House press briefing, Press Secretary Robert Gibbs gave a convoluted answer to a reporter who asked why the hundreds of billions in TARP funds have not been tracked.
“I think that Treasury Department puts out monthly reports on the lending activities from banks,” he began. “Again one of the suggestions was, in some ways being able to follow what might not be, according to us, followable. In other words you have the fungibility of money that is not put in a separate TARP lending account for the deposit and guarantee in Auburn, Alabama, for us to measure the increase in lending.
“The administration believes that that transparency is important but can be done better in measuring the increase in that lending. But it is going to be hard to follow, again, something as fungible as money moving from one bank to the other.”