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The Corporate Observer A Publication by Attorneys Devoted to Protecting Consumer Rights

Response to Special Inspector General’s TARP Report

Posted in Banks and Financial Services

 A “Private Right of Action” Must Be Added to the TARP Legislation

TARP monies must not become a slush fund for the ethically challenged.

On July 21, Neil Barofsky, Special Inspector General for the Troubled Asset Relief Program, released his office’s quarterly report.  To his credit, he demonstrates the kind of transparency taxpayers who are footing the bill deserve.  Notably on page 5-6 of the report, he identifies and describes in some detail 35 investigations brought by his office.  He also describes in depth two matters that have already been publicly filed.  Good stuff indeed.  But the magnitude of this program (trillions of dollars), the profound seriousness of this endeavor to our economy, and the hopes of future generations demand more. 

A far greater degree of enforcement must be available. 

In just a few months, Mr. Barofsky has received 3,200 tips.  This means trouble is afoot as many feared. It needs to be “nipped in the bud”.  Confidence must be maintained and the TARP monies must not become a slush fund for the ethically challenged.

We recommend Mr. Barofsky seek additional funding for more staff and investigators.  The Administration should also request that Congress amend the TARP to allow a “private right of action."  Private attorneys ferreting out fraud can make a real difference.  We need more than 2 filed cases to serve as a deterrent, protect the essential mission of the TARP, and limit the cost to taxpayers.

We cannot afford to wait.

 

The More Transparency the Better

We applaud the report as a small step in the right direction.  Much has been made of the $27.3 trillion that the report warns could end up as the overall cost of resolving the economic crisis.  Although this figure represents a worse-case scenario, the magnitude of that amount should alarm taxpayers and regulators alike.  To avoid coming close to that number, the Treasury must heed the recommendations of the report by: (1) enacting realistic mandatory transparency requirements; and (2) opening its own methods and decisions to the glare of public scrutiny.

As Justice Douglas said in framing the Securities Act of 1933, in the midst of the Depression, “Clean Air is the best disinfectant.”

 

(Post was prepared with the assistance of David Martin, University of North Carolina 2010)