The special inspector general for the TARP program, Neil Barofsky, has made a reputation for himself by issuing tough assessments of the troubled federal program for troubled assets. It’s been a problem for Tim Geithner’s Treasury Department. No one, after all, wants a watchdog at their heels. Treasury’s solution: muzzle the dog.
Specifically, Treasury is considering excluding the special Inspector General — known as “SIGTARP” in bailout circles — from the new $30 billion small-business lending program announced by President Obama in his state of the union address.
The new program — under which community banks would be given access to low interest funds to lend to small businesses — technically is not part of the original TARP, and needs to be approved by Congress. The funding for the program, however, comes from the leftovers of the original $700 billion TARP authorization. And, many of the recipients will be the same — in fact, some $11 billion in TARP funds now held by banks would be eligible for conversion to the new program. And to a large extent, the issues and concerns raised by the programs are identical.
Word of his possible emmuzzlement triggered a sharp response from Mr. Barofsky. In a letter to the Treasury Department, he referred to the proposed exclusion as a “curious change,” one that would be “terribly wasteful and lead to duplicative efforts and, at worst, could lead to significant exposure to waste, fraud and abuse….”
The Obama Administration insists that no decision has yet been made on SIGTARP’s role. It is reportedly concerned, however, about getting banks to participate in the new program, many of which are healthy and wouldn’t relish TARP’s restrictions and scrutiny.
That itself should raise red flags: since when is convincing healthy corporations to take taxpayer money a serious public policy problem? But even if it were, dropping protections against waste of such money is hardly the way to address it. The sorry history of TARP shows us we need more snarling watchdogs, not fewer.
