Has the Obama administration broken the law on TARP? It appears that it has violated a major law on oversight — by failing to provide any.
When Congress first created the TARP program, it insisted on oversight over the actions of the Treasury Secretary, rejecting the Bush proposal to allow Henry Paulson unlimited and unsupervised authority over $700 billion of taxpayer money. They created the Financial Stability Oversight Board (FINSOB), comprised of the Treasury Secretary, the Chairman of the Federal Reserve Board, the Chairman of the Securities and Exchange Commission, the Secretary of Housing and Urban Development, and the Director of the Federal Housing Finance Agency. The law requires the board to meet on a monthly basis, but during the Bush administration it met at least every other week to review actions in relation to the bailouts.
Interim Assistant Secretary for Financial Stability Neel Kashkari testified before the House Financial Services Committee on December 10th about the oversight (emphases mine):
In addition to the normal oversight provided by Congressional committees of jurisdiction, the Congress established four important avenues of oversight: one, the Financial Stability Oversight Board; two, the Special Inspector General; three, the Government Accountability Office; and four, the Congressional Oversight Panel. I will review Treasury’s interaction with each body in detail.
First, we moved immediately to establish the Financial Stability Oversight Board, which, by law, includes: the Secretary of the Treasury, the Chairman of the Federal Reserve Board, the Chairman of the Securities and Exchange Commission, the Secretary of Housing and Urban Development, and the Director of the Federal Housing Finance Agency.
The law required the first board meeting to take place within fourteen days. We moved very quickly, and the Oversight Board met within four days. At that initial meeting, the members of the Board selected Chairman Bernanke to be Chairman of the Oversight Board. The law requires the Board to meet once a month, but it has already met four times in the just two months since the law was signed, with numerous staff calls between meetings, and expects to meet again this week.
We have also posted the bylaws and minutes of the Board meetings on Treasury’s website. In addition, the Oversight Board has interacted with other oversight bodies, such as the GAO and the Congressional Oversight Panel.
The listing of board minutes can be found on the Treasury’s website. However, according to this list, the last FINSOB meeting took place on January 15th of this year — five days before Barack Obama’s inauguration. The meeting was conducted via conference call. It was the last meeting in which former Treasury Secretary Henry Paulson participated.
According to this, current Treasury Secretary Tim Geithner has yet to participate in the oversight function Congress mandated by law. Despite receiving hundreds of billions of dollars in additional TARP funds, it appears that the current administration has performed zero oversight over it. Not only does that beg the question as to what Tim Geithner is actually doing as Treasury Secretary, it also makes it appear that Congress has no desire to protect the money it’s shoveling into the West Wing of the White House.
I have contacted the White House for any comment they may have on this matter, and I will update readers when they respond (via HA reader Morgen).
Treasury officials and Members then reviewed and discussed the restrictions that would apply to AIG under the terms of the investment, including restrictions on corporate expenses, restrictions on lobbying, and limitations on executive compensation that would apply under EESA, as well as the additional limitations that would apply to senior executive compensation and bonuses. In addition, AIG would be required to comply with certain corporate governance requirements, including the formation of a risk management committee under the company’s Board of Directors.
So Treasury knew about the bonuses in November 2008. Maybe if they’d held the FINSOB meetings, Obama wouldn’t have been gobsmacked by them.
Update II: Here’s a better link to the FINSOB meeting minutes archive.