Congressman Sestak Votes To Overhaul Troubled Assets Relief Program (TARP) To Achieve Greater Transparency And Accountability
Congressman Sestak Votes To Overhaul Troubled Assets Relief Program (TARP) To Achieve Greater Transparency And Accountability
Today, Congressman Joe Sestak (PA-07) voted for H.R. 384, the Troubled Asset Relief Program (TARP) Reform and Accountability Act of 2009, which passed the House by a margin of 260-166. The legislation overhauls the TARP to strengthen accountability, increase transparency, close loopholes, and require the Treasury Department to take significant steps on foreclosure mitigation. It requires quarterly public reporting on the use of TARP funds; mechanisms to ensure "appropriate" use and compliance with all terms for the use of funds; and clarifies and confirms new uses for future funds released under TARP- including foreclosure mitigation, domestic automobile manufacturer assistance, state and municipal bond purchasing, and other additional uses. The Congressman also voted to disapprove a motion to deny the President the use of these funds.
The Congressman supported the legislation to improve oversight over the TARP, which is a necessary program to secure Americans' economic security, to restore availability of affordable car, education, small business and other consumer loans, and prevent further decline in the stock market-- where the value of life savings, pensions, and 401Ks is lost.
Congressman Sestak said, "There have been serious policy missteps in the government's implementation of the original TARP approval of $350 billion, including the decision of Secretary Paulson not to use the TARP funding for its original intent of purchasing distressed mortgage loans and securities, but rather for capital insertion into banking institutions. While providing capital was essential, abandoning the distressed asset purchases altogether was a mistake as, after his announcement of this, prices of those assets caved further. This failure to provide clarity to the price of those assets by the government; purchase of them -- or evenly conducting a reverse auction to set their prices -- resulted in a failure to attract private investment once the price was known, and once the value of an institution holding such assets could then be determined. This bill moves a long way toward correcting this and other failures, including first and foremost the failure of the Treasury Department and the financial and banking industry to ensure accountability for the application of these funds. These accountability rules apply to all institutions that have received funding back to the commencement of the TARP program in October 2008."
"This bill does this by mandating a quarterly reporting of funds and their use for increased lending, including a pre-agreement on how' such funds will be used prior to any institution receiving TARP funds from the government. Prohibitions on the use of these funds such as purchasing other healthy financial institutions are defined. In addition, this legislation mandates that an institution that accepts such funds must prohibit bonus or executive incentive compensation to the 25 most highly compensated employees; forbid "golden parachutes"; provide for claw-back" of executive compensation received on inaccurate statements; and that the Treasury must obtain warrants equal to at least 15% of any financing provided so as to reap a fair share in the profit as the institution recovers.
"In the midst of a foreclosure crisis, the bill also provides for a foreclosure mitigation plan of between $40 and $100 billion since quick action is needed to avoid the darker scenarios in which crashing house prices force even millions more from their homes, completely undermining the financial system and economy. It also confirms the Treasury authorization to provide assistance to automobile manufacturers under the TARP, but with conditions that include a long-term restructuring of the industry to be globally competitive. Finally, it ensures that Treasury's authority to use TARP is also focused toward supporting the increased availability of consumer and small business loans, as well as municipal securities and commercial real estate loans and securities.
"In October, I voted for the Emergency Economic Stabilization Act to avoid an imminent collapse of our economy," said Congressman Sestak. The passage of that bill was necessary, but its implementation has not been accountable, transparent, or sufficient. I wrote to former Secretary of the Treasury Paulson three times to express my concern that the implementation of the bill is not consistent with the intent of the authorization. I believe that the enacted bill gave authority to the Treasury to purchase troubled assets and to replenish bank capital, and I believe strongly that the solution must address both of these issues. Rather, Secretary Paulson chose to implement principally a plan to inject capital into the banks through the purchase of preference shares, but instead of using these funds to lend to consumers, the banks have withheld the TARP funds. I believe much more emphasis needs to be placed upon removing the toxic mortgage securities from banks, and enhance lending by placing a value on the banks' mortgage securities through auctions and government purchases. Only then will private investment be sufficiently attracted to purchase these assets and create a full market and again for them, as well as to invest in forward institutions holding such assets now that their actual value has been diminished.
"Before its departure, the Bush administration formally requested the release of the second half of the $700 billion, which will automatically be released since the Senate last week passed legislation that overruled objections to distribution of the funds which I supported. The TARP Reform and Accountability Act is needed now more than ever to address the concerns I have voiced since October- while demanding greater accountability and transparency of TARP- so that we can resolve our economic crisis," said Congressman Sestak.
The Congressman's vote in support of this legislation is another example of his ongoing efforts to restore both economic security to his constituents and transparency to government actions in the midst of this economic crisis.
In fact, Congressman Sestak has been focused on the developing crisis in our financial markets since February when the Pennsylvania Higher Education Assistance Agency (PHEAA) alerted him that it had to stop making student loans because of the problems in the credit markets. The Congressman wrote then to the Secretary of the Treasury and the Chairman of the Federal Reserve Board, asking for direct intervention, but Chairman Bernanke responded that the "most important contribution that the Federal Reserve can make is to foster the restoration of more-normal functioning in financial markets more generally."
Unfortunately, over the last ten months, that proved wrong. Instead, what began with foreclosures in sub-prime mortgages, has now engulfed and devastated a growing number of financial institutions, causing a widespread credit freeze that affects his constituents, where lending has stopped because of the fear that mortgage-related securities held by banks may soon make these banks insolvent. During a call with Secretary Paulson and Chairman Bernanke, they admitted that this was the worst financial crisis since World War II that means the Great Depression.
On the issue of transparency and accountability, in December 2008, Congressman Sestak sent a letter to Secretary of the Treasury Paulson in response to a December 2 Government Accountability Office (GAO) report which identified the same problems with TARP's implementation that Congressman Sestak had independently highlighted in two previous letters to the Secretary.
In November, while involved in Congressional hearings examining the root causes and effects of the turmoil in our economy, Congressman Sestak wrote to Secretary Paulson noting that the "restoration of public confidence in our governmental and financial institutions can not begin until the American taxpayers see consistent enforcement of the oversight provisions and behavior from the financial institutions acknowledging that many of them share the responsibility for the economic crisis that has engulfed our country and the rest of the global economy." Therefore, it is incumbent upon Congress to ensure full transparency through accountable oversight of the actions taken by the Federal Government correcting the absence of these which led to the market's failure.
Also in November, Congressman Sestak wrote to Speaker Nancy Pelosi to ask her to join him in demanding Secretary Paulson follow the accountability measures specified in the Stabilization bill and calling on the Democratic leadership to accelerate the assignments of positions on the Congressional Oversight Panel so that is could meet its requirements for supervising use of taxpayer funds. The final appointments were announced on Thursday 21 November, more than 6 weeks after the bill was originally passed by the House and Senate.
Prior to his letter to Speaker Pelosi, Congressman Sestak also sent a letter to United States Attorney General Michael Mukasey requesting him to "conduct an appropriate and thorough investigation into any and all financial institutions, corporations, and individuals that are suspect of criminal action relating to our current economic crisis."
"A failure of accountability and transparency is gravely harming our economy and risks creating a deep, more protracted recession. It is critical that the provisions of the TARP Reform and Accountability Act be implemented without delay to restore proper oversight and transparency," said Congressman Sestak.
Source