Press Releases
November 20, 2008
Roll Out of Rescue Plan Questioned by Conrad
Senator Urges Greater Oversight in Treasury's Use of Funds
Washington– Senator Kent Conrad today questioned the Bush Administration’s implementation of the $700 billion economic rescue plan and expressed concern that the Treasury Department has allowed the funds to be used inappropriately by financial institutions.
“Here we are seven weeks after passing this economic rescue package and we are still faced with confusion and uncertainty surrounding its implementation,” Senator Conrad said. “Instead of changing course with the wind, this Administration needs to focus and identify a definitive plan for stabilizing the financial markets and the broader economy.”
In a letter to Secretary of the Treasury Henry Paulson, Senator Conrad says he is deeply troubled by the manner in which the Treasury Department has used its authority. He raised concern that emergency funds from the Troubled Assets Relief Program, or TARP, are being used to acquire other healthy institutions and pay for large employee bonuses and lavish corporate retreats. The Senator warned Secretary Paulson that such uses of taxpayer money are “unacceptable, and Treasury must not allow them to occur.”
Senator Conrad called for more transparency of the process in which Treasury is dispersing the TARP funds and asked for greater focus on assistance to homeowners facing foreclosure.
“When I voted for this rescue plan I did so to protect families, workers, and retirees on every main street in every city and town in North Dakota and across the nation. Make no mistake: this should not be used simply as a bail out of Wall Street,” Senator Conrad said. “It is imperative that we do everything we can to protect the taxpayer. Every one of their dollars needs to be accounted for.”
The letter to Paulson is below.
November 20, 2008
The Honorable Henry Paulson
Secretary of the Treasury
1500 Pennsylvania Avenue, NW
Washington, D.C. 20220
Dear Mr. Secretary:
I write to express my concerns regarding the implementation of the Troubled Asset Relief Program (TARP).
I supported the Emergency Economic Stabilization Act because it appeared to be our best chance to stabilize the financial markets and the broader economy. In response to your assertions about the dire economic consequences of inaction and the need to respond to unforeseen circumstances, Congress acted quickly to grant you broad authority and relied on your assurances about how it would be effectuated. Unfortunately, I have become deeply troubled by the manner in which the Treasury Department has used its authority.
First, I am concerned that Treasury is allowing the TARP funds to be used inappropriately by financial institutions. The TARP was intended to restore liquidity to the credit markets, spur economic activity, and address the foreclosure crisis, not to redistribute wealth from the American taxpayers to Wall Street employees and shareholders. However, there are reports that financial firms are expending TARP funds on increased bonuses to employees, higher dividends to shareholders, lavish conferences, and corporate acquisitions that serve not to save struggling institutions, but rather to increase profits at healthy ones. Such uses of taxpayer money do nothing to help restore liquidity to financial markets and are not in the best interests of taxpayers. They are unacceptable, and Treasury must not allow them to occur. (In particular, the accounts of AIG’s spending on lavish employee rewards, travel and retreats are outrageous; it is critical for Treasury and the Federal Reserve to clarify which institution has primary responsibility for making sure AIG is taking appropriate actions to protect the substantial taxpayer investment in that company.)
It is also troubling to learn from news accounts that Treasury may have misled members of Congress, the public, and financial market participants about its intentions with regard to the purchase of troubled assets. Specifically, the media has reported that you decided prior to enactment of the EESA to abandon the purchase of troubled assets and focus instead on direct capital infusions, yet until last week you and other Treasury officials continued to suggest that Treasury was still planning to go forward with the asset purchase program. Since the current crisis is due, at least in part, to a crisis in confidence and aversion to making credit and investment decisions in the absence of full and accurate information, it is important for Treasury to signal its intentions clearly. Misleading statements and unexplained or poorly explained changes of policy are not helpful to restoring confidence in the credit and equity markets.
In addition, a key concern of the Congress in negotiating changes to the Administration’s original proposal was ensuring that the government would receive the highest possible return on taxpayers’ investments. Unfortunately, reports indicate that Treasury may have overpaid for the equity it has received so far. Going forward, Treasury must use its authority to ensure that taxpayers are repaid to the greatest extent possible, so that the TARP does not contribute to our nation’s growing debt.
Further, Treasury must increase transparency in the process of selecting institutions to receive funds, and apply clear, consistent standards for eligibility so taxpayers are assured that Treasury is not picking winners and losers on an ad hoc basis.
Finally, I am disappointed by Treasury’s lack of focus on foreclosure mitigation. Home foreclosures are one of the root causes of the economic downturn, and must be addressed as part of the government’s response. The TARP legislation clearly required a significant effort by the Administration to help people keep their homes; a much more significant effort is needed in this area.
Thank you for your attention to these matters.
Sincerely,
KENT CONRAD
United States Senate
