Following the collapse of major financial institutions, Congress enacted a sweeping $700-billion taxpayer-financed bailout of the financial sector with the primary purpose of getting money to flow through the economy again through personal and business loans.
Now, months into the program—known as the Troubled Asset Relief Program (TARP)—and billions of dollars later, no one knows how banks spent the money, because there were few requirements or restrictions on how it could be used.
Where Did All The Money Go?
To highlight these failures and provide a framework to ensure accountability and oversight of the bailout, Illinois PIRG’s federal tax and budget reform advocate Nicole Tichon published “Failing the Bailout: Lessons for Obama from Bush’s Failures on TARP.”
According to Tichon, the bailout never met its goal of stimulating lending and it never had a sustained plan. It lurched from strategy to strategy without noticeable impact on the economy. One day Citibank qualified for money as a healthy bank; on another, as a failing bank.
The report paints a picture of an industry running wild even as it keeps asking for more and more taxpayer dollars. For example, Bank of America, which has received funds under three different TARP programs, sponsored a multi-million dollar Super Bowl party this year.
Fixing The Bailouts
On March 11, a month after releasing our report, Tichon was the only public interest witness to testify at the Congressional Joint Economic Committee hearing on TARP transparency. She summarized her findings and told the committee that:
• The picture for taxpayers is blurry at best and infuriating at worst. Evidence suggests that taxpayer funds were used for lobbying for additional funds, executive bonuses to be paid on profits that do not exist, and a wide array of corporate perks.
• Taxpayers deserve to know, in a clear and concise way, which reforms have occurred, to restore some level of confidence that the next $350 billion will be allocated and used fairly and productively.
• Without specific, proactive oversight, the TARP program will continue to fail. TARP fund recipients are not going to voluntarily provide reports on their actions.
“Taxpayers deserve to know what reforms will be in place before billions more are lost into a black hole of bonuses, expenses and mergers,” said Tichon. “If better oversight and transparency measures had been in place for the first installment, we’d at least know where the money went and why.”
