Baucus Seeks Audit of Treasury Involvement in U.S. Companies
Finance Chairman says transparency, exit strategy critical to taxpayer protection
Washington, DC – Senate Finance Committee Chairman Max Baucus (D-Mont.) called on Troubled Asset Relief Program (TARP) Special Inspector General Neil Barofsky to conduct a full-scale audit of federal involvement in firms in which the U.S. Government has a significant stake as a result of programs designed to stabilize the financial sector and restore credit markets. In a letter sent today, Baucussuggested the audit include a thorough analysis of Treasury’s day-to-day involvement in corporate decision-making at the respective firms and an assessment of the extent to which adequate safeguardsare being employed to protect taxpayer interests. The purpose of the audit would be to measure theability of companies to regain independence, allowing Treasury to phase out its ownership role in atimely manner.
“Nine long months ago I outlined a plan for a TARP Special Inspector General to ensure the program is protecting taxpayers. Unfortunately, we still need a full audit of government’s actual role in the dailyoperations of TARP recipients to guarantee the program remains transparent, temporary and accountable,” Baucus said. “We need to ensure proper systems are in place to allow government toget back to the business of governing as quickly as possible, and struggling companies to emerge with healthy management and operations. That is a primary goal of the TARP program, it was a precondition of my support and it’s what the millions of Americans still on the hook for these dollarsexpect.”
The Special Inspector General operates independently from the Treasury Department, with funding and full authority to audit and investigate the TARP. Sen. Baucus insisted the office have adequate resources to meet its goal of identifying and ending any fraud or abuse of taxpayer funds used by the program. Barofsky presented his first quarterly report to the Finance Committee on April 21, 2009.
Full text of the letter follows here.
June 11, 2009
The Honorable Neil M. Barofsky
Office of the Special Inspector General for the Troubled Asset Relief Program
1801 L. Street, N.W.
Washington, D.C. 20220
Dear Special Inspector General Barofsky:
The U.S. Government is approaching majority owner status for several U.S. companies through equity investments made pursuant to the Troubled Asset Relief Program and several Federal Reserveprograms. The companies subject to large government ownership positions including AIG, GM, GMAC, Citigroup, and Bank of America are some of the nation's leading insurance, banking, industrial and lending institutions. Publicly available information suggests that the Treasury, the Federal Reserve,and/or other federal regulators have operated with varying degrees of oversight and interaction involving the management of these companies with respect to issues of governance, compensation, and operating decisions.
Treasury has stated that public ownership of institutions is not a policy goal, that direct involvement in daily management of institutions in which it has made large investments is expected to be limited, and that the Government's equity stake in these institutions is expected to be short lived.Nevertheless, the Congress and the public have raised questions regarding the extent of government involvement in overseeing these institutions, whether adequate measures are being taken to protect and recoup the taxpayer's investment in these firms, and whether there is adequate transparency indecision making. Without effective risk assessments, plans, internal controls, oversight, and transparency, the Government's substantial investment may be at risk. At the same time, the U.S. Government must strike the right balance between oversight and unduly infringing on company management and efforts to regain self sufficiency.
Given the above, I am requesting that SIGTARP undertake a body of audit work to examine the following issues:
(1) what is the extent of Government involvement in management of companies in which it has made able investments, including direction and control over such elements as governance, compensation,spending, and other corporate decision making.?
(2) To what extent are effective risk management, internal controls, and monitoring in place to protect and balance the Government's interests and corporate needs?
(3) Are there performance measures in place that can be used to track progress against long term goalsand timeframes affecting the Government's ability to wind down its investments and disengage from these companies?
(4) Is there adequate transparency to support decision making and to provide full disclosure to the Congress and the public?
I expect that SIGTARP will issue an initial report of its findings related to the above as well as continue to monitor the evolution of the Government's involvement with these institutions and to provide updated assessments to the Congress as warranted.
I appreciate the effective work you have done since assuming the position of Special Inspector General for TARP, and I hope this audit will further the oversight goals of your office.
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