TARP oversight panel calls for more transparency after conflicts emerge
The Treasury Department's extensive use of private contractors in TARP creates significant concerns about transparency and potential conflicts of interest. In its October report, the Congressional Oversight Panel reviewing the program enacted by President Bush two years ago said private businesses operate 91 different contracts worth up to $434 million under the Troubled Asset Relief Program. The program ended a few weeks ago and the Treasury estimates the final cost to be about $50 billion. The largest contracts are those provided to Fannie Mae and Freddie Mac for administration and compliance services for foreclosure-mitigation programs and they "raise particular concerns." "Both Fannie Mae and Freddie Mac have a history of profound corporate mismanagement, and both companies would have collapsed in 2008 were it not for government intervention," the panel said. "Both companies have fallen short in aspects of their performance, as Fannie Mae recently made a major data error in reporting on mortgage re-defaults and Freddie Mac has had difficulty meeting its assigned deadlines." Panelists recommend the Treasury publish lists of subcontracts online and provide regular, public updates on contractors’ performance to improve transparency. Problems arise because contractors don't have to comply with requests under the Freedom of Information Act and can hire subcontracts that don't have to be disclosed, according to the oversight panel. "Important information is buried in task orders that are never published in any form, and Treasury publishes no meaningful information on contractors’ performance during the life of the contract," the panel said. The potential conflict of interests is borne out of the private sector's goals of profit and the fact some some law firms advising the Treasury also advise banks that received TARP funds. The panel recommends the Treasury develop an independent mechanism for monitoring conflicts that makes it less reliant for information from the contractors and agents themselves. Sen. Ted Kaufman (D-Del.) is the chairman of the panel. Earlier this month, he replaced Elizabeth Warren, who has been named special adviser to President Obama and Treasury Secretary Timothy Geithner. Other members include J. Mark McWatters; Richard H. Neiman, superintendent of banks for New York; Damon Silvers, policy director and special counsel for the AFL-CIO; and Kenneth Troske, economics professor at the University of Kentucky. Write to Jason Philyaw.