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Basic questions Treasury still hasn’t answered

ASK THIS | March 06, 2009

The oversight panel appointed by Congress to watch over the government's $700 billion financial bailout still can't get straight answers to simple questions. No wonder public confidence isn't high.

By Dan Froomkin

In its first report, issued back in December, the oversight panel appointed by Congress to watch over the Troubled Asset Relief Program asked a lot of questions.

"We are here to investigate, to analyze and to review the expenditure of taxpayer funds," the chair of the panel, Harvard Law Professor Elizabeth Warren wrote. "But most importantly, we are here to ask the questions that we believe all Americans have a right to ask: who got the money, what have they done with it, how has it helped the country, and how has it helped ordinary people?”

The questions she asked were straightforward, important, and surprisingly basic. They were such good questions that we republished them here.

In her January report, Warren explained that on many key questions, the responses she got from the Bush Administration’s Treasury Department didn’t really provide answers. “To ease the burden on Treasury and to make it clear precisely which questions remain to be answered, the Panel has constructed a grid with its original questions and Treasury’s responses,” she wrote. You can find the grid starting on page 14.

In her March report, issued today, Warren wrote that, more than a month into the Obama administration, she’s still waiting. And if you read the questions she’s still asking, you’ll see one good reason why public confidence in the program isn’t high.

In the appendix of today’s report is a letter she sent yesterday to the Treasury Secretary Timothy F. Geithner. She expresses “the Panel’s concern that many of the questions we raised remain unanswered.”

She explains in the letter:

There are many questions that we believe must be addressed in coming weeks, but we ask you to focus your attention on one immediate issue. Treasury has not explained how its financial stabilization programs fit together to address the problems that caused this crisis. This failure to connect specific programs to a clear strategy aimed at the root causes of the crisis has produced uncertainty and drained your work of public support. Financial institutions, businesses, and consumers will not return to healthy investment in the economy if they fear that the federal government is careening from one crisis to another without an intelligible road map.

For these reasons, we ask that you provide answers to the following questions about Treasury’s current views and the approach outlined in the Administration’s recently-issued Financial Stability Plan. Please answer each question in detail and please indicate the economic or other evidence on which your each answer rests:

1. What do you believe the primary causes of the financial crisis to have been? Are those causes continuing? How does your overall strategy for using Treasury authority and taxpayer funds address those causes?

2. What is the best way to recapitalize the banking system? How does your answer relate to your assessment of the causes of the financial crisis?

3. What is your view of the economic status of the American consumer and the amount that constitutes a healthy debt burden for the consumer? The Consumer and Business Lending Initiative and elements of the Homeowner Affordability and Stability Plan are designed to restart consumer purchases of homes and automobiles, but the success of these programs depends on the ability of consumers to absorb more debt. Has Treasury developed any data to determine whether consumers can shoulder the additional debt to power these initiatives?

Geithner should be able to answer these questions. If he can’t, we’re in even bigger trouble than we thought. He should answer them publicly. And as long as he doesn’t journalists should be asking them relentlessly, as well.

Don’t buy the bailout hype
David Cay Johnston writes in September that the administration had not laid out a coherent, specific and compelling need for its bailout proposal.

More on the financial crisis
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