Failed Bailout: Lessons For Obama From Bush's Failures On Tarp

2009-02-10

Executive Summary

"If the taxpayers are helping you, then you've got certain responsibilities to not be living high on the
hog,"
-- President Barack Obama to the Associated Press on Feb. 4, 2009.
Following the collapse of major financial institutions Congress enacted a sweeping $700 billion taxpayerfinanced
bailout of the financial sector. However, months into the program and billions of dollars later, no
one knows how the money was spent and no one is convinced that it’s achieved any of the intended
results. The U.S Public Interest Research Group Education Fund (U.S. PIRG) believes it is critical for
Congress to demand and the Department of Treasury to implement mechanisms and metrics to make sure
that the actions of the TARP recipients reflect the original goals and objectives of the Emergency Economic
Stabilization Act (EESA). Those mechanisms must be based on the sound public policy principles of
oversight and accountability.
The report first establishes that what is known about how the TARP recipients’ behavior before, during and
after the bailout paints a dire picture of how the TARP funds were spent. It then presents a clear
opportunity for lawmakers to regain some of the withering faith of the American people through widely
supported execution tactics and simple communication practices with respect to TARP.
1.1 Key Findings:
• Without specific, proactive oversight, the TARP program will continue to fail. TARP fund recipients
are not going to voluntarily comply with the intent of the EESA law or provide reports on their
actions.
• The Congressional Oversight Panel (COP), the Special Inspector General, the Government
Accountability Office and two bills currently active in Congress all provide actionable
recommendations and pose tough questions to the Department of Treasury for reforming TARP.
Treasury should consider the provisions and recommendations to reform TARP.
• 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 implemented fairly,
strategically and with upfront sign-off on accountability measures.
To help achieve these ends, U.S. PIRG Education Fund created a set of metrics and proposes the use of a
TARP Report Card. The metrics are based on reports from leading government watchdogs, including the
Government Accountability Office (GAO), the COP on the TARP and the TARP Special Inspector General.
This report describes why that report card is needed. Based on the lack of any information about where the
first $350 billion went, and the real possibility that Treasury never asked or required any information, the
first report card, attached, gives the Bush Administration an F in almost every oversight category for its
fourth quarter 2008 actions.
We will continue to issue quarterly report cards to track efforts by the fledgling Obama administration.
Some early efforts are promising, such as its restrictions on lobbying by firms receiving TARP funds, its
efforts to increase transparency and its actions on excessive executive pay and bonuses. We recommend
that the Obama administration consider use of the report card to keep American taxpayers and lawmakers
aware of the progress made in reforming the program.