TARP: A Troubling Investment

Floor Speech

Mr. STEARNS. Madam Speaker, I rise today to address the troubling results of a report that was just released last Friday by the Congressional Oversight Panel on the Troubled Asset Relief Program, TARP.

In summary, the 50-page report indicates that our United States Treasury has overpaid by about $78 billion in order to implement the largest private sector bailout in American history. In fact, the study directly states that, ``Treasury paid substantially more for the assets it purchased than their current market value.'' How much more? Our Treasury purchased assets worth about $178 billion for $254 billion. That is a direct and unnecessary transfer of our taxpayer dollars to private financial institutions that utilize reckless investment strategies.

Thus, the Treasury has essentially shortchanged taxpayers to the tune of $78 billion and has not acted as a good steward of our taxpayers' funds. To be sure, former Secretary Paulson looked the American people in the eye and assured us that the taxpayer investment in the TARP program was sound, and we would be given full value in return for our investment. In a public statement to the American people in October, Paulson said of the TARP program, ``This is an investment, not an expenditure, and there is no reason to expect the program will cost taxpayers anything.'' Unfortunately, Paulson's statement couldn't be further from the truth. The first $350 billion in TARP funds was spent in haste, and we have nothing to show for it but waste.

And the reason for this waste? The use of standardized documents that hindered Treasury's ability to address differences in credit quality among the capital infusion recipients. Furthermore, our Treasury has also failed to explain its reasoning for subsidizing some banks more than others, leaving taxpayers and Congress in the dark.

To add more fuel to the fire, Neil Barofsky, the Special Inspector for the TARP program, came out last week and stated: The government needs to beef up its oversight and fraud prevention mechanism in regard to the TARP program. He stated, ``The Troubled Asset Relief Program represents a massive and unprecedented investment of taxpayers' money, designed to stabilize the financial industry, but the long-term success of this program is not assured.''

American taxpayers are rightly infuriated. Our Treasury has yet to even adopt baseline fraud prevention standards for the TARP program. Additionally, there is a noticeable lack of oversight language included with the TARP capital infusion contracts. Special Inspector Barofsky strongly cautions that oversight language is needed in all TARP contracts, particularly with big banks like Citicorp and Bank of America, and automobile companies like Chrysler and General Motors. Given this troubling investment situation, I am skeptical of how the next $350 billion will be spent.

Looking back to October when former Secretary Paulson came to Congress with a 2 1/2 page double-spaced document ceding himself total authority to spend $700 billion in taxpayer dollars, I suppose it is not entirely surprising to find out that $78 billion has been wasted. The bailout plan was weak from the very beginning. It was Congress that had to step in and demand oversight and transparency of Paulson's TARP program. And what we ended up getting was a proposal for self-regulation, with Paulson and former Fed Chairman Ben Bernanke as two of only five members of an oversight board charged with monitoring their own actions. What we really need is oversight by only those who are independent of the administration and that do not have ties to the Wall Street banking community.

So today on the House floor, I echo the sentiments of the Congressional Oversight Panel, which stated, ``If TARP is to garner credibility and public support, a clear explanation of the economic transaction and the reasoning behind any such expenditure of funds must be made clear to the public.'' Our Treasury has less than 30 days to act together before the next report is released, and hard-working taxpayers deserve to hear that their investment has not been made in vain.

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