The Warren (COP) Report: TARP Report Card

Posted by AzBlueMeanie:

Elizabeth Warren, a Harvard law professor and chair of the congressional oversight panel overseeing the government's Troubled Asset Relief Program (TARP), suggested that getting rid of top executives and liquidating problem banks may be a better way to solve the economic crisis.

The Congressional Oversight Panel (COP), in a report released yesterday, also said the Treasury may be relying on too rosy an economic scenario to guide its $700 billion bailout, and declared that the success of the program after six months is “mixed.” Three of the group’s members disagreed with at least some of the findings. Congressional Panel Suggests Firing Managers, Liquidating Banks – Bloomberg.com

Warren, in an interview on Bloomberg Television, said yesterday that while “things may be getting a little better” under Geithner, the Treasury still needs to be more transparent about how it is spending the taxpayers’ money.

“We still have a long way to go, a very long way,” she said.

In the report, Warren’s panel said “it is possible that Treasury’s approach fails to acknowledge the depth of the current downturn and the degree to which the low valuation of troubled assets accurately reflects their worth.”

The group said it was offering an examination of “potential policy alternatives” for the Treasury and not endorsing any shift at this time.

Still, it said a bank liquidation would be “least likely to sap the patience of taxpayers” and “provides clarity relatively quickly” to the markets.

“Allowing institutions to fail in a structured manner supervised by appropriate regulators offers a clearer exit strategy than allowing those institutions to drift into government control piecemeal,” the report said.

The report also said that past successful financial rescues were accompanied by governments’ “willingness to hold management accountable by replacing — and, in cases of criminal conduct, prosecuting — failed managers.”

Sounds like the COP agrees with economists like Paul Krugman and Joseph Stiglitz rather than Lawrence Summers, Director of the White House's National Economic Council for President Obama and former Treasury Secretary under President Clinton, and Robert Rubin, former Treasury Secretary under President Clinton. In my opinion, these guys helped to create this problem, I would never have hired them. I am guessing Obama's theory is that they know where the bodies are buried. But can you really trust them to change their spots now to actually solve a problem they helped to create? I don't know.

Two of the panel members, New York State Superintendent of Banks Richard Neiman and former New Hampshire Senator John Sununu, issued separate findings.

“We are concerned that the prominence of alternate approaches presented in the report, particularly reorganization through nationalization, could incorrectly imply both that the banking system is insolvent and that the new administration does not have a workable plan,” the two wrote.

Sununu and the five-member panel’s other Republican appointee, Representative Jeb Hensarling of Texas, dissented from the entire report.

Here is Elizabeth Warren delivering her video Report Card on TARP.

0 responses to “The Warren (COP) Report: TARP Report Card

  1. Is depression here or not? not very clear. But if you look at the past history recessions and depressions come and go. (see for instance,
    http://www.recessioninfocenter.com
    Economies go through cycles and recession is part of the cycle. Too much government interference can backfire and it seems like that’s what the governmetn is doing now

  2. AzBlueMeanie

    The FDIC only has authority over depository banks. The “problem” banks are the large investment banks on Wall Street which were deregulated by the Gramm-Leach-Bliley Act to permit banking/investment/insurance. Some estimates I have seen suggest that 95% of the “toxic assets” that have nearly collapsed our economy are held by these Wall Street investment banks.

    Geithner has asked Congress to extend FDIC-like authority to permit regulation of the large investment banks in a similar fashion. I assume that “receivership” (the correct legal term, not nationalization) is his fallback position if these banks fail to meet the “stress test” for being under-capitalized. The management who mismanaged these banks would be fired and replaced, and the bank recapitalized and sold to private investors, just like the FDIC does now. The investment banks would not be “government banks” as the hysterical loons on the right claim. Receivership is a normal part of the bankruptcy process, it is done all the time.

  3. Liquidating problem banks.. I thought that is what the FDIC was supposed to do. Don’t they do that? I thought that the bad old days of Bush deregulation were over.