The Corporate Observer Blog : Consumer Protection, Corporate Abuse : Class Action Lawyer & Attorney : Steven Berk Law Firm

 “Instead of writing Secretary Geithner, what Congressman Sestak really needs to do is use his good offices to propose legislation creating a private right of action to curb TARP abuses.” 

Recently, Representative Joe Sestak (D-Pa) opined on The Hill’s Congress Blog that we need more oversight and transparency for TARP funds.  You think???  Of course we do.  It is the largest federal spending program in a generation.

Back in July, I called attention to this issue, seeking to protect Main Street from being victimized once again.  I want to congratulate Congressman Sestak for seeing the light on this issue.  In a time when it’s easy to doubt Capitol Hill, it is refreshing to see Mr. Sestak focused on protecting Main Street.

Surely one method of protecting Main Street, as Mr. Sestak points out, is enhanced transparency regarding the use of TARP funds.  But transparency – perhaps the most popular word in politics – is hardly going to be enough.

We have a brewing crisis, complaint numbers (each of which requires investigation) are off the charts and incentives are still strong for companies to misuse TARP funds.  As commendable as it is that Mr. Sestak calls attention to this critical issue, his effort will fall short of helping Main Street.  Put bluntly, a single letter to Treasury Secretary Geithner may help with your constituents but it won’t hinder the fraud and abuse lurking in the TARP program. 

Back in July, already thousands of tips were received concerning possible fraud.  The government can’t investigate everyone, but private attorneys can and need the right and incentive to do so. 

Instead of writing Secretary Geithner, what Congressman Sestak really needs to do is use his good offices to propose legislation creating a private right of action to curb TARP abuses.  Give the thousands of hungry, young, talented and committed attorneys in this country a chance to help both themselves and Main Street by zealously pursuing abuses of TARP funds. 

Congressman, we stand ready to help you draft that legislation.  It is time.  You would be doing a great service to the millions of Americans who were forced to shoulder the financial consequences of Wall Street abuse.

Assisted by David Martin and Jessica Begen

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 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)

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