A congressional panel overseeing the U.S. financial rescue 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, 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.
“All successful efforts to address bank crises have involved the combination of moving aside failed management and getting control of the process of valuing bank balance sheets,” the panel, headed by Harvard Law School Professor Elizabeth Warren, said in its report.
Here’s the actual report language:
The April oversight report for COP is entitled Assessing Treasury’s Strategy: Six Months of TARP. In this report, COP offers a preliminary look at Treasury’s strategy and offers a comparative analysis of previous efforts to combat banking crises in the past.
Over the last six months, Treasury has spent or committed $590.4 billion of the TARP funds. Treasury has also relied heavily on the use of the Federal Reserve’s balance sheet which has expanded by more than $1.5 trillion (not including expected TALF loans) in conjunction with the financial stabilization activities it has undertaken beyond its monetary policy operations. This has allowed Treasury to leverage TARP funds well beyond the funds appropriated by Congress.
The total value of all direct spending, loans and guarantees provided to date in conjunction with the financial stability efforts (including those of the FDIC as well as the Treasury and the Federal Reserve) now exceeds $4 trillion. This report reviews in considerable detail specific criteria for evaluating the impact of these programs on financial markets.
Further Sources: Congressional Panel Suggests Firing Managers, Liquidating Banks Robert Schmidt Bloomberg, April 8 2009 http://www.bloomberg.com/apps/news?pid=20601087&sid=aJJ_MkIv9VvA&
TARP Oversight Panel: Oust Executives, Liquidate Banks DIANA GOLOBAY April 8, 2009 11:56 AM CST http://www.housingwire.com/2009/04/08/tarp-oversight-panel-oust-executives-liquidate-banks/
Lukewarm verdict on US financial rescue plan Congressional panel warns that the US Treasury’s $700bn bail-out may prove inadequate. James Quinn 08 Apr 2009 http://www.telegraph.co.uk/finance/financetopics/recession/5127240/Lukewarm-verdict-on-US-financial-rescue-plan.html
Originally published at The Big Picture blog and reproduced here with the author’s permission.