Dear Members of Congress,
Common Cause urges Congress to require - in statute - more transparency and accountability of the use of the second half of the $700 billion financial bailout money. We urge you to immediately pass H.R. 384, the TARP Reform and Accountability Act of 2009.
Larry Summers, the Director-designate of the National Economic Council, lists several changes the Obama Administration will make in its administration of the bailout program in his recent letter to Congressional leaders (http://www.scribd.com/doc/10162101/Larry-Summers-Letter-to-Congress) . Many of the changes described in the letter are identical to the provisions in H.R. 384 introduced by House Financial Services Committee Chairman Barney Frank (D-MA). For example:
Transparency of Program
Summers letter: "President-elect Obama is committed to providing a full and accurate accounting of how the Treasury Department has allocated the funds spent to date and going forward."
H.R. 384: Treasury shall require any existing or future institution that receives funding under TARP to provide no less than quarterly public reporting on its use of the funding.
Accountability for Recipients of Federal Money
Summers letter: "The President-elect has directed his Treasury Department to monitor, measure and track what is happening to lending by recipients of our financial rescue assistance."
H.R. 384: In connection with any new receipt of TARP funds, Treasury is required to reach agreement with the institution and its primary federal regulator on how the funds are to be used and benchmarks the institution is required to meet.
Summers letter: "We will ensure that resources are directed to increasing lending and preventing new financial crisis and not to enriching shareholders and executives. Those receiving exceptional assistance will be subject to tough but sensible conditions that limit executive compensation until tax payer money is paid back."
H.R. 384: For any new receipt of TARP funds, applies the most stringent non-tax executive compensation restrictions: requires Treasury to prohibit incentives that encourage excessive risks, provides for claw-back of compensation received based on materially inaccurate statements, and prohibits all golden parachute payment for the duration of the investment.
Foreclosure Mitigation Plan
Summers letter: "The President-elect has directed his White House and Cabinet to work with Congress immediately to implement smart, aggressive policies to reduce the number of preventable foreclosures by helping to reduce mortgage payments for economically stressed but responsible homeowners while also reforming our bankruptcy laws and strengthening existing housing initiatives like Hope for Homeowners."
H.R. 384: Use of the second $350 billion is conditioned on the use of up to $100 billion, but no less than $40 billion, for foreclosure mitigation, with plan required by March 15, 2009. The foreclosure mitigation plans must apply only to owner-occupied residences and shall leverage private capital to the maximum extent possible consistent with maximizing prevention of foreclosures.
We applaud the Obama Administration for indicating its willingness to improve the transparency and accountability within the Troubled Asset Relief Program (TARP). Under the Bush Administration, the Treasury Department has committed $350 billion and cannot say with any certainty what this massive infusion of capital has done to mitigate the economic crisis because it does not know what the recipients did with the money.
However, we believe Congress has failed in its constitutionally mandated role of overseeing the executive branch in the past, with costly results. Congress should make clear requirements of the Treasury Department in the form of legislation if it is serious about overseeing how this money is being used.
The Summers letter expresses support for many of the same provisions that exist in the Frank bill, except that where the Summers letter is vague, H.R. 384 is more specific. There is enough flexibility built into the Frank bill to allow the Treasury Department to change course if necessary, while ensuring that Congress plays the appropriate role in this process, rather than acting as a automatic teller machine for the executive branch, as it has done so frequently over the last eight years.
H.R. 384 contains constructive if not critical requirements and should be passed into law before Congress releases the second half of the financial bailout funds.
President, Common Cause