I guess it should come as no surprise to anyone who was paying attention the last eight years but apparently the Bush administration severly mishandledlast fall’s meltdown of the financial industry.
According to Associated Press the governement overpaid tens of billions of dollars for stocks and other assets in its massive bailout last year of Wall Street banks and financial institutions.
AP said the Congressional Oversight Panel, a government watchdog, reported Friday last year’s overpayments amounted to a taxpayer-financed $78 billion subsidy of the firms.
AP also reported that the findings added to the frustrations of lawmakers already wary of the $700 billion rescue plan, known as the Troubled Asset Relief Program. Congress approved the plan last fall, but members of both parties criticized spending decisions by the Bush administration and former Treasury Secretary Henry Paulson.
Senate Banking Chairman Chris Dodd, D-Conn., said the overpayment was sure to “raise eyebrows.
” “I can understand some gap,” he said. “No one is expecting perfection between the price you pay and what you think you’re getting. But that’s a pretty large disparity.”
No kidding. It renews suspicion that the swiftness of the action last fall was designed to help financial institutions more than taxpayers. After all consider that financially ailing insurance giant American International Group, which the Treasury Department deemed to be too big to be allowed to fail, received $40 billion from the Treasury for assets valued at $14.8 billion, the oversight panel found.
In December, in response to questions from the oversight panel, Paulson wrote that the value of preferred stock purchased by the government was “at or near par,” meaning Treasury paid $1 for every $1 dollar of asset.
“The way the Treasury secretary described it does not fit with the numbers that were produced in our much more extensive valuation analysis,” panel chairwoman Elizabeth Warren told reporters Friday. “The secretary of the Treasury described it in December that these were par transaction and that is not supported by the numbers.”
So, once again the business as usual practices followed by the Bush administration are taking a hit. Everyone should agree that more oversight was needed then and more will needed in the future.
New Treasury Secretary Timothy Geithner is expected to announce Monday a sweeping new framework for helping banks, loosening credit and helping reduce foreclosures.
Treasury spokesman Isaac Baker said in a statement: “Treasury’s efforts since the fall prevented a systemwide collapse, but more needs to be done to stabilize the financial sector, increase lending and protect taxpayer dollars.”
He said the plan Geithner will announce aims to free up credit, “while strengthening transparency and accountability measures so that taxpayers know where and how their money is being spent and whether it’s achieving real results.”
Let’s hope the new system works for both financial institutions and taxpayers. It’s another example, though, of the massive ineptitude of George W. Bush.