Bailout Not Well Planned

Now the Government Accountability Office is telling us that the Department of Treasury's bailout of the financial system is not well planned and could lead to a lot of mismanagement and waste or, presumably, worse, according to a story by The Post's Amit Paley.

Is that a surprise? Perhaps not. But Government Inc. thinks its worthy of ongoing discussion.

After all, there's a lot of taxpayer money -- $150 billion, as of Nov. 25 -- and the future of our capitalist system at stake.

You'll recall that the government is hiring contract auditors and such to run what's been dubbed Troubled Asset Relief Program, or TARP.

No puns here, for now, about the symbolic meaning of TARP. (Is that musty already?)

"GAO recognizes that TARP has existed for less than 60 days and that a new program of such magnitude faces many challenges, especially in this current uncertain economic climate. However, Treasury has yet to address a number of critical issues, including determining how it will ensure that CPP is achieving its intended goals and monitoring compliance with limitations on executive compensation and dividend payments. Moreover, further actions are needed to formalize transition planning efforts and establish an effective management structure and an essential system of internal control."

We can do better people. Right?

Paley wrote:

"In a response to the report, the Treasury agreed that it needed to do more to develop internal controls over the plan but emphasized that less than 60 days have passed since the legislation authorizing the bailout took effect.

"'We believe that Treasury has made significant efforts to ensure transparency and good communication,' Neel Kashkari, the head of the department's bailout program, said in a letter, "'but more can and will be done in these areas."


Here's the full report. Government Inc. likes the title: Additional Actions Needed to Better Ensure Integrity, Accountability, and Transparency

By the way, a regular reader has this to say about the accounting contractors hired to help Treasury operate the TARP program:

"The firms will be auditing and setting up internal financial controls. As a matter of fact, Treasury has gone out of its way to assure the Congress that Treasury will be running the program. Hank Paulson's made it clear who's calling the shots."

Your thoughts?

By Robert O'Harrow |  December 3, 2008; 9:56 AM ET bailout
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No, the auditors will not be "run[ning]" the TARP. The firms will be auditing and setting up internal financial controls.

As a matter of fact, Treasury has gone out of its way to assure the Congress that Treasury will be running the program. Hank Paulson's made it clear who's calling the shots.

To implement, Treasury has also been negotiating agreements with Wall Street firms with the requisite skills to be "Financial Agents of the United States." They will be custodians and managers of various assets and can buy/sell those assets. However, as the TARP has veered off its original thrust and funds have been deployed mainly for direct investments in failing firms, many of the financial agent set of skills have not been much needed.

The usual government contractors continue to
have scant openings to participate in TARP support because they don't have the specialized skills and also can't serve as fiduciaries. has all the docs to explain the various roles.

Posted by: axolotl | December 3, 2008 2:22 PM

Mr. O'Harrow you are poorly informed on these issues and therefore ill equipped to write about or direct others to become better educated. Of course, the size and complexity of contrcts has increased over the last 25 years. Many of the articles you direct the reader to have made this point repeatedly as have some of the commentators to this blog. Do you read any of these articles to improve your knowledge and understanding? The mix of skills needed perform these complex tasks on large,quick turn around tasks do not, for the most part, exist in the current government workforce. The most sophisticated, well educated and well trained people do not seem to want to work full time for the government. I manage a staff of 40 people. The majority graduated from HS or college over 30 yrs ago. Most have no interest in being trained or re-trained for an evolving job landscape.In addition, hiring new people and finding work for a work force unable to perform the current mix of tasks is a real problem that I am sure you know nothing about. Many of the tasks that are contracted are not "inherently governmental" and many are obs that employees at any level in my orgainzation pointedly do not want to do.You should read some of Paul Light's recommendations yourself. By the way, Professor Light is a contractor who successfully uses the government contracting system to keep himself and his graduate students fully funded and his university programs humming.Did you know that?

Posted by: rjpittya | December 4, 2008 5:06 PM

For several months I have been advocating a massive DEBT restructuring that would include the entire world. I simplified how to do this in three steps. First just make a list to include the debtor, debt-holder and a bank to administer it. The second step would be to just create enough FIAT money to pay all the debt and third authorizing the Central Banks of the entire world to make an accounting adjustment crediting the debtor and paying the debt-holder.
Review it here:

If done worldwide the currency values among the various currencies would adjust too different values for inflation, I suspect America has the largest total debt of any country in the world so the dollar might weaken in value the most. If the US Dollar does devalue then we would be much more able to compete with the rest of the world.

Our economy has had most opportunities to actual produce (manufacture) something removed from it because we just cannot compete with the low wages paid elsewhere. Ths debt REBOOT would do two things, first it would take the pressure off our economy (the rest of the world as well) to allow the economy to restart because of all the NEW Capital coming back into the system. Because our debt (the USA) will cause a much larger adjustment in the US dollar’s value, the Reboot would allow time for American production of items we use every day to return and our dependence on other countries could be reduced. It would happen because we could not afford the more costly imported products and not because of tariffs which the trade agreements will not allow us to do.

Allen Charles

Posted by: allencharles | December 5, 2008 9:47 AM

Global Disorder will find a New Paradigm:

Paulson is dancing without music - - Issues that we will all be confronting:

* New Tax Structures - look for it coming to a country or continent near you.
* New Oversight - rules that will impact the way you do business.
* New Regulations- that will hopefully dampen the rip and tear capitalism that helped create our current global market decay.

* World Wide Tariffs - Look for the revival of tariffs or defacto tariffs that will begin to appear around the globe as job creation becomes number one.
* OIL Revenues Decline - look for world wide terrorist traffic to slow significantly. These campaigns our expensive and don't run on credit.

* Federal Reserve - Sorry Ben, looks like an A for effort and an F for application. The world economies are melting and the Fed's lack of critical oversight is in the middle of it.
* Nationalize the Federal Reserve: Time to make a change in personnel and structure. Reconnect our monetary system to the taxpayers not private international banking interests.

* Bailout Money: focus on rebuilding the real economy (middle class worker). This is hard time staking work but will start to change the current downward momentum.
* National Health Care: Massive unemployment, crushing corporate health & retirement burdens, and rising premiums that are forcing the rolls to swell well beyond the 40mm number of uninsured USA citizens that swamp our emergency rooms and hospital balance sheets. This will force the creation of a national single payer health care program.

* Leadership: In a capitalistic environment you are not rewarded for failure. Look for legacy leadership to be cycled out in both Business and National Politics. It will be subtle but wide reaching by the end of Obama's four years term.

Folks, we are all on the merry go round and some of us can't get off while others are being thrown off into brick walls. The good news is we have the ability to rebuild a a more effective economic and political order. Maybe not by choice but desperation. Fasten your seat belts, refocus your thinking to a forward mode, opportunity an action awaits the astute and patient individuals.

James Monachino

Posted by: jim_monachino | December 5, 2008 4:08 PM

The bail out of the banks and investment banks by Sec. Paulson is a fraud. Paulson is part of this group as a CEO of Goldman Sachs. There is a definite conflict of interest when bailing out one's pals without any oversight. The American people were against this bailout and rightly so.Since when does the federal govt bail out private industry as banks? If the banks and investment banks and AIG used a scheme to gamble and then lost, they must go. If one goes to Las Vegas and gambles and looses, one does not go to the casino to get one's money back. The banks and investment banks were greedy.CEO's were paid enormous sums of money for loosing money of the banks.When does one get compensated for loosing money. If a person or a private corporation looses money to such an extreme that he cannot meet his obligations, he declares bankruptcy or goes out of business. If the banks and investment banks went down, others would spring up in their place. In addition, when Paulson just handed out millions of dollars to his pals, these pals did not perform what they were supposed to perform-lending money. Instead, these pals bought other companies and hoarded the money.These pals should go out of business or have a wealthy company purchase them.Paulson is a disgrace.He has made this a socialist country for his pals, not for the people who need help.

Posted by: irichman | December 9, 2008 11:03 AM

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