[JPRT, 110th Congress]
[From the U.S. Government Publishing Office]



========================================================================
 
QUESTIONS ABOUT THE $700 BILLION EMERGENCY ECONOMIC STABILIZATION 
                               FUNDS

                              ________

THE FIRST REPORT OF THE CONGRESSIONAL OVERSIGHT PANEL FOR ECONOMIC 
                           STABILIZATION


[GRAPHIC] [TIFF OMITTED] CONGRESS.#13



                December 10, 2008.--Ordered to be printed
QUESTIONS ABOUT THE $700 BILLION EMERGENCY ECONOMIC STABILIZATION FUNDS
                                                                      



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                               ________


THE FIRST REPORT OF THE CONGRESSIONAL OVERSIGHT PANEL FOR ECONOMIC 
                           STABILIZATION


[GRAPHIC] [TIFF OMITTED] CONGRESS.#13


                December 10, 2008.--Ordered to be printed

                                ________

        CONGRESSIONAL OVERSIGHT PANEL FOR ECONOMIC STABILIZATION
                             Panel Members
                        Elizabeth Warren, Chair 
                        Rep. Jeb Hensarling \1\
                           Richard H. Neiman
                             Damon Silvers

\1\ Rep. Hensarling did not approve this report. See Press Release, 
Hensarling Statement on First Congressional Oversight Panel Report, 
Office of Representative Jeb Hensarling (R-TX), Dec. 9, 2008.

                            C O N T E N T S

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                                                                   Page
Introduction.....................................................     1
Ten Questions from COP...........................................     4
Ten Questions from COP: Discussion...............................     5
    1. What is Treasury's Strategy?..............................     5
    2. Is the Strategy Working to Stabilize Markets?.............     8
    3. Is the Strategy Helping to Reduce Foreclosures?...........     9
    4. What Have Financial Institutions Done With the Taxpayers' 
        Money Received So Far?...................................    11
    5. Is the Public Receiving a Fair Deal?......................    12
    6. What is Treasury Doing to Help the American Family?.......    14
    7. Is Treasury Imposing Reforms on Financial Institutions 
        That Are Taking Taxpayer Money?..........................    16
    8. How Is Treasury Deciding Which Institutions Receive the 
        Money?...................................................    17
    9. What is the Scope of Treasury's Statutory Authority?......    18
    10. Is Treasury Looking Ahead?...............................    20
About COP........................................................    20
Future Oversight Activities......................................    21
Appendix: Statutory Authority of the Congressional Oversight 
  Panel..........................................................    22




QUESTIONS ABOUT THE $700 BILLION EMERGENCY ECONOMIC STABILIZATION FUNDS

                                _______
                                

               December 10, 2008.--Ordered to be printed

                                _______
                                

                              INTRODUCTION

    The U.S. and the global economy have been in a steadily 
accelerating downward spiral since the early spring of 2007. 
The American family is at the epicenter of this crisis.
    The headlines may belong to the financial markets and mega-
institutions, but the recession has visited every household in 
the country. The crisis affects Americans' ability to pay their 
bills, to secure their retirement, to continue their 
educations, and to provide for their families. The unemployment 
rate is the highest it has been in fourteen years.\2\ In the 
last three months, 1.2 million Americans lost their jobs; 
533,000 in November 2008 alone.\3\ Service sector employment 
levels, in particular, fell far faster than expected last 
month.\4\ One in ten mortgage holders is now in default, unable 
to make payments on their homes.\5\ More than 200,000 families 
and small businesses filed for bankruptcy protection in the 
last two months.\6\ Middle- and lower-income families have 
watched nervously as reductions in state funding threaten 
college access and affordability.\7\ Retail sales continue to 
fall,\8\ credit card defaults are rising,\9\ and savings rates 
hover at zero.\10\ Shrinking retirement funds have left 
millions of retired people to wonder how they will pay basic 
expenses and millions more to wonder if they must continue 
working until they die.\11\
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    \2\ Peter S. Goodman, U.S. Jobless Rate Hits 14-Year High, N.Y. 
Times, Nov. 8, 2008, at A1.
    \3\ Sudeep Reddy et al., Job Losses Worst Since 74: 533,000 Shed in 
November, Wall St. J., Dec. 6, 2008, at A1.
    \4\ Ellen Simon, Service Sector Shrinks As New Orders Fall In Nov., 
Associated Press, Dec. 3, 2008, available at http://news.yahoo.com/s/
ap/20081203/ap_on_bi_ge/economy_services.
    \5\ James R. Hagerty & Deborah Soloman, U.S. News: Rising Number of 
Homeowners in Trouble, Wall St. J., Dec. 6, 2008, at A2.
    \6\ Caroline Humer, Consumer Bankruptcy Filings Jump Vs Year Ago, 
Reuters, Dec. 3, 2008, available at http://www.reuters.com/article/
domesticNews/idUSTRE4B25U620081203.
    \7\ Robert Tomsho, For College-Bound, New Barriers to Entry--Their 
Budgets Squeezed, State Schools Cap Enrollment, Weigh Tuition 
Increases; Fears for Lower-Income Students, Wall St. J., Dec. 3, 2008, 
at D1.
    \8\ Stephanie Rosenbloom, In November, Shoppers Cut Spending Even 
More, N.Y. Times, Dec. 3, 2008, at B6.
    \9\ Kristina Dell, With Defaults Rising, Is a Credit-Card Crisis 
Looming, Nov. 14, 2008, Time, available at http://www.time.com/time/
business/article/0,8599,1859224,00.html.
    \10\ Henry Kaufman, How the Credit Crisis Will Change the Way 
America Does Business, Wall St. J., Dec. 6, 2008, at A11.
    \11\ Robert Powell, Crisis Forces About One-In-Five Savers To Tap 
Retirement Assets, MarketWatch, Dec. 4, 2008, available at http://
www.marketwatch.com/news/story/crisis-forces-about-one-in-five-savers/
story.aspx?guid=B2F244D0-CC95-4906-AF0F-4B8CB7AC2220.
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    A short summary of the economic history of the past few 
months is grim.

     Credit, when it is available, has become 
dramatically more expensive for all borrowers, and some worry 
it will get even more expensive next year.\12\
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    \12\ See John M. Berry, Borrowers Elbow for Position, 
Bloomberg.Com, Dec. 4, 2008, available at http://www.bloomberg.com/
apps/news?pid=20601039&refer=columnist--berry&sid= aohbHGXFYtKU.

     U.S. stock markets have lost more than 40% of 
their value over the past year, and markets elsewhere in the 
world have also declined sharply.\13\
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    \13\ See, e.g., Dow Jones Industrial Average, MSN Money, available 
at http://moneycentral.msn.com/investor/charts/
chartdl.aspx?Symbol=%24indu.Dow.

     In September, the federal government took control 
of the two largest mortgage financing intermediaries, generally 
---------------------------------------------------------------------------
known as Fannie Mae and Freddie Mac.

     All three major U.S.-based auto companies have 
told Congress they face the threat of imminent bankruptcy.

     The largest U.S. commercial bank, Citigroup, and 
the largest U.S. insurance company, AIG, have both received 
substantial infusions of capital from the U.S. government, with 
AIG under threat of imminent bankruptcy.

     Two major investment banks, Bear Stearns and 
Merrill Lynch, have disappeared in mergers. One major 
investment bank, Lehman Brothers, has filed for protection 
under the bankruptcy laws. The two largest remaining investment 
banks, Goldman Sachs and Morgan Stanley, have transformed 
themselves into bank holding companies.

     The largest thrift savings banks, Washington 
Mutual and IndyMac, have been taken over by their regulator.

     The Federal Deposit Insurance Corporation has 
placed 171 banks, with combined assets of $116 billion, on the 
problem list as of September 30, 2008.\14\
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    \14\ Quarterly Banking Profile: Third Quarter 2008, FDIC 3 
available at http://www2.fdic.gov/qbp/2008sep/qbp.pdf.

    In response to the financial crisis, Congress passed the 
Emergency Economic Stabilization Act of 2008, authorizing the 
Treasury Department to commit up to $250 billion in taxpayer 
dollars, to be followed by another $100 billion and another 
$350 billion if warranted.\15\ The statute also created a 
Congressional Oversight Panel.\16\ The Act's purposes are to 
``restore liquidity and stability to the financial system of 
the United States . . . in a manner that (A) protects home 
values, college funds, retirement accounts, and life savings; 
(B) preserves homeownership and promotes jobs and economic 
growth; (C) promotes overall returns to the taxpayers of the 
United States; and (D) provides public accountability.'' \17\
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    \15\ Emergency Economic Stabilization Act of 2008, Pub. L. No. 110-
343 Sec. 115 (Oct. 3, 2008).
    \16\ Id., at Sec. 125.
    \17\ Id., at Sec. 2.
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    From the passage of the Emergency Economic Stabilization 
Act of 2008 to the present date, Treasury has used its 
authority under the Act to provide 87 banks with $165 billion 
in exchange for preferred stock and warrants. Treasury further 
used its authority to provide AIG with $40 billion in exchange 
for preferred stock and warrants, and to provide Citigroup with 
a further $20 billion in preferred stock and warrants. As part 
of a program to guarantee approximately $306 billion in 
Citigroup's troubled assets, Treasury receives $4 billion of 
Citigroup preferred stock and warrants.\18\ Together, these 
disbursements constitute approximately $1,900 per American 
family, or almost 3% of the typical family's pre-tax 
income.\19\
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    \18\ Capital Purchase Program Transaction Report, Nov. 25, 2008 
available at http://www.treas.gov/initiatives/eesa/docs/
TransactionReport-11262008.pdf; id.; Summary of Terms, Nov. 23, 2008 
available at http://www.treas.gov/press/releases/reports/
cititermsheet_112308.pdf; see also Troubled Asset Relief Program: 
Additional Actions Needed to Better Ensure Integrity, Accountability, 
and Transparency, GAO, 09-161, December 2008, at 16-20, 28.
    \19\ See Current Population Survey, 2007 Social and Economic 
Supplement, Table HINC-06, U.S. Census Bureau, available at http://
pubdb3.census.gov/macro/032007/hhinc/new06_000.htm.
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    This is not the full extent of the federal government's 
actions to date. Treasury has worked in coordination with the 
Federal Deposit Insurance Corporation, the Board of Governors 
of the Federal Reserve System and other financial regulators. 
The Federal Reserve has injected trillions of dollars of 
liquidity into the financial system, dwarfing by an order of 
magnitude expenditures by Treasury under the Act.\20\
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    \20\ The Fed's evolving liquidity toolkit, Reuters, Dec. 2, 2008, 
available at http://www.reuters.com/article/bondsNews/
idUSN2635039920081202?sp=true.
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    This is the first report of the Congressional Oversight 
Panel. We are here to investigate, to analyze and to review the 
expenditure of taxpayer funds. 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?
    These questions, in greater detail, form the heart of this 
report.
    This report, issued two weeks after the Oversight Panel's 
first meeting, does not attempt to answer the questions 
Congress and the American people have about the use of the 
powers granted to Treasury under the Emergency Economic 
Stabilization Act of 2008. Rather we seek to pose those 
questions clearly in the context of the events that have 
occurred since the adoption of the Act in October. In doing so, 
we intend to set the agenda for our future work and to advise 
the Congress as to the issues that it will need to address in 
the next Administration.
    In framing these questions, the Oversight Panel has 
benefited from its consultations with Treasury, Treasury's 
Inspector General, the Government Accountability Office, and 
the staff of the Federal Reserve Board. We intend to consult 
with the newly appointed Special Inspector General as soon as 
possible.\21\ The Oversight Panel in particular has benefited 
from the report of the Government Accountability Office on the 
implementation of the Emergency Economic Stabilization Act of 
2008, dated December 2, 2008.\22\
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    \21\ Paul C. Light, Senate Confirms N.Y. Prosecutor As Inspector 
General for Bailout, Wash. Post, available at http://
www.washingtonpost.com/wp-dyn/content/article/2008/12/08/
AR2008120803538.html.
    \22\ Troubled Asset Relief Program: Additional Actions Needed to 
Better Ensure Integrity, Accountability, and Transparency, GAO, 09-161, 
December 2008.
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    In the months to come the Congressional Oversight Panel--
COP--will do its best to guarantee that public actions are 
built on robust foundations that will strengthen the real 
economy. The American people have an important role to play in 
this process. As we continue our work on behalf of Congress and 
the American people, we will issue monthly reports. But we will 
always return to the American people, searching for answers and 
asking more questions.

                         TEN QUESTIONS FROM COP

    1. What is Treasury's Strategy? What does Treasury think 
the central causes of the financial crisis are and how does its 
overall strategy for using its authority and taxpayer funds 
address those causes? What specific facts caused Treasury to 
change its strategy in the last two months? What specific facts 
changed that made the purchase of mortgage-backed assets a bad 
idea within days of the request and what specific facts changed 
again to make guaranteeing such assets a good idea a few weeks 
later?

    2. Is the Strategy Working to Stabilize Markets? What 
specific metrics can Treasury cite to show the effects of the 
$250B spent thus far on the financial markets, on credit 
availability, or, most importantly, on the economy? Have 
Treasury's actions increased lending and unfrozen the credit 
markets or simply bolstered the banks' books? How does Treasury 
expect to achieve the goal of price discovery for impaired 
assets? Why does Treasury believe that providing capital to all 
viable banks, regardless of business profile, is the most 
efficient use of funds?

    3. Is the Strategy Helping to Reduce Foreclosures? What 
steps has Treasury taken to reduce foreclosures? Have those 
steps been effective? Why has Treasury not generally required 
financial institutions to engage in specific mortgage 
foreclosure mitigation plans as a condition of receiving 
taxpayer funds? Why has Treasury required Citigroup to enact 
the FDIC mortgage modification program, but not required any 
other bank receiving TARP funds to do so? Is there a need for 
additional industry reporting on delinquency data, 
foreclosures, and loss mitigations efforts in a standard 
format, with appropriate analysis? Should Treasury be 
considering others models and more innovative uses of its new 
authority under the Act to avoid unnecessary foreclosures?

    4. What Have Financial Institutions Done with the 
Taxpayers' Money Received So Far? What have the companies who 
received money from Treasury done with the money? Have the 
companies used the funds in the way Treasury intended when it 
disbursed them? How have institutions supported under the 
Capital Purchase Program used their funds, and have they 
leveraged the capital support to increase lending activity? Is 
this different from the way funds were utilized for 
institutions who received funds pursuant to the Systemically 
Significant Failing Institutions plan?

    5. Is the Public Receiving a Fair Deal? What is the value 
of the preferred stock Treasury has received in exchange for 
cash infusions to financial institutions? Are the terms 
comparable to those received in recent private transactions, 
such as those with Warren Buffett and the Abu Dhabi Investment 
Authority?

    6. What is Treasury Doing to Help the American Family? Does 
Treasury believe American families need to borrow more money? 
Have Treasury's actions preserved access to consumer credit, 
including student loans and auto loans at reasonable rates? 
What restrictions will Treasury put on credit issuers to assure 
that taxpayer dollars are not used to subsidize lending 
practices that are exploitive, predatory or otherwise harmful 
to customers? What is Treasury doing to ensure that its 
spending is directed in ways that maximize the impact on the 
American economy?

    7. Is Treasury Imposing Reforms on Financial Institutions 
that are taking Taxpayer Money? Congress has told the auto 
industry to reform its current practices before it could be 
considered for taxpayer aid and the British are requiring 
reforms on their banks as a precondition for capital infusions. 
Has Treasury required banks receiving aid to:

           Present a viable business plan;

           Replace failed executives and/or directors;

           Undertake internal reforms to prevent future 
        crises, to increase oversight, and to ensure better 
        accounting and transparency;

           Undertake any other operational reforms?

    8. How is Treasury Deciding Which Institutions Receive the 
Money? What factors is Treasury using to determine which 
institutions receive equity infusions, purchase of portfolio 
assets, or insurance of portfolio assets? Is Treasury seeking 
to use TARP money to shape the future of the American financial 
system, and if so, how?

    9. What is the Scope of Treasury's Statutory Authority? 
What is Treasury's understanding of the statutory limits on its 
use of funds? How does Treasury justify its decisions under the 
Act in relation to its view of these limits? How is Treasury 
carrying out its statutory mandate regarding credit insurance?

    10. Is Treasury Looking Ahead? What are the likely 
challenges the implementation of the Emergency Economic 
Stabilization Act will face in the weeks and months ahead? Can 
Treasury offer some assurance that it has worked out 
contingency plans if the economy suffers further disruptions?

                   TEN QUESTIONS FROM COP: DISCUSSION

    1. What is Treasury's Strategy? What does Treasury think 
the central causes of the financial crisis are and how does its 
overall strategy for using its authority and taxpayer funds 
address those causes? What specific facts caused Treasury to 
change its strategy in the last two months? What specific facts 
changed that made purchase of mortgage-backed assets a bad idea 
within days of the request and what specific facts changed 
again to make guaranteeing such assets a good idea a few weeks 
later?
    Treasury has pursued a number of strategies using its 
authority under the Emergency Economic Stabilization Act:

     Strategy 1: Buying Mortgage-Related Assets. In 
September 2008, Secretary Paulson requested authority for 
Treasury to buy up to $700 billion in troubled mortgage-related 
assets.\23\ According to the Secretary, purchasing the assets 
would reduce systemic risk and increase confidence in 
institutions holding these ``toxic assets.'' Although Congress 
granted Treasury the authority to execute this plan on October 
3, Treasury did not act on this authority.\24\
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    \23\ Press Release, FACT SHEET: Proposed Treasury Authority to 
Purchase Troubled Assets, Sept. 20, 2008, available at http://
www.treas.gov/press/releases/hp1150.htm.
    \24\ See GAO Report, supra note 18, at 1, 15-16.

     Strategy 2: Purchasing Preferred Stocks and 
Warrants to increase the capital base of banks. On October 14, 
Treasury announced a plan to invest up to $250 billion into 
financial institutions in exchange for preferred stocks and 
warrants in order to ``significantly strengthen financial 
institutions and improve their access to funding, enabling them 
to increase financing of the consumption and business 
investment that drive U.S. economic growth.'' \25\ Treasury 
indicated that it still intended to make purchases of mortgage-
related assets from financial institutions.\26\
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    \25\ Press Release, Statement by Secretary Henry M. Paulson, Jr., 
on Actions to Protect the U.S. Economy, Department of Treasury, Oct. 
14, 2008, available at http://www.treasury.gov/press/releases/
hp1205.htm; see also Mark Lander, U.S. Investing $250 Billion in Banks; 
Dow Surges 936 Points, N.Y. Times, Oct. 14, 2008, at A1.
    \26\ GAO Report, supra note 18, at 16.

     Strategy 3: On November 12, Treasury announced 
that it would not purchase troubled mortgage-related assets, as 
it had asked for authority to do in September.\27\ Instead, 
Secretary Paulson stated that Treasury was considering programs 
that would allow non-bank financial institutions to participate 
in the CPP if they secure an equivalent amount of capital from 
private investors and providing federal financing to allow 
private investors to purchase asset-backed securities.\28\
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    \27\ See Press Release, Statement by Secretary Henry M. Paulson on 
Financial Rescue Package and Economic Update, Department of Treasury, 
Nov. 12, 2008, available at http://www.treasury.gov/press/releases/
hp1265.htm.
    \28\ See Press Release, Statement by Secretary Henry M. Paulson on 
Financial Rescue Package and Economic Update, Department of Treasury, 
Nov. 12, 2008, available at http://www.treasury.gov/press/releases/
hp1265.htm.

     Strategy 4: On November 25, Treasury announced it 
would participate in the Federal Reserve's Term Asset-Backed 
Securities Loan Facility (TALF), a $200 billion program that 
would provide financing to investors of highly rated asset-
backed securities, focused on student and auto loans, credit 
card debt, and small business loans.\29\ According to Secretary 
Paulson's statement announcing the program, ``[b]y providing 
liquidity to issuers of consumer asset-backed paper, the 
Federal Reserve facility will enable a broad range of 
institutions to step up their lending, enabling borrowers to 
have access to lower cost consumer finance and small business 
loans.'' \30\
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    \29\ GAO Report, supra note 18, at 31; Press Release, Federal 
Reserve, Nov. 25, 2008, available at http://www.federalreserve.gov/
newsevents/press/monetary/20081125a.htm.
    \30\ Press Release, Secretary Paulson Remarks on Consumer ABS 
Lending Facility, Department of Treasury, Nov. 25, 2008, available at 
http://www.treasury.gov/press/releases/hp1293.htm.

     Other Strategies: It has been widely reported that 
Treasury is considering a plan to support the issuance of new 
mortgages at a 4.5% interest rate through mortgage-backed 
securities of Fannie Mae and Freddie Mac, which should enable 
some consumers to purchase homes.\31\ In addition, Treasury has 
stated it is considering other strategies, such as FDIC 
Chairman Sheila Bair's proposal for restructuring residential 
mortgages, streamlined loan modification programs for at-risk 
borrowers, and guarantee of loan modifications by private 
lenders.\32\
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    \31\ See, e.g., Edmund L. Andrews, Washington;'s New Tack: Helping 
Home Buyers, N.Y. Times, Dec. 5, 2008, available at http://
www.nytimes.com/2008/12/05/business/05housing.html; Robert Schmidt & 
Dawn Kopecki, Paulson Considers New Plan to Resuscitate U.S. Housing 
Market, Bloomberg.Com, Dec. 4, 2008, available at http://
www.bloomberg.com/apps/news?pid=20601087&sid=aE1D2EJR0B2k.
    \32\ Tami Luhby, FDIC's Bair Pushes Aggressive Mortgage Plan, 
CNNMoney.Com, Nov. 14, 2008, available at http://money.cnn.com/2008/11/
14/news/economy/fdic_bair; GAO Report, supra note 17, at 29-30.

    In empowering Treasury, Congress provided substantial 
flexibility in the use of funds so Treasury could react to the 
fluid and changing nature of the financial markets. With these 
powers goes a responsibility to explain the reasons for the 
uses made of them. With these monies go a responsibility to 
ensure that the support to the economy from each dollar spent 
is maximized consistent with the purposes of the Act. We ask 
Treasury to articulate its vision of the problem, its overall 
strategy to address that problem, and how its strategic shifts 
since September 2008 fit into that overall strategy.
    For example, efforts to increase the availability of credit 
assume that the fundamental problem is a lack of liquidity. But 
if Americans are more worried about their own economic 
security--their employment prospects, their current expenses, 
and their debt levels--then increasing liquidity will have 
little impact on consumer spending.
    Similarly, buying or guaranteeing some mortgage-backed 
assets could help place a floor on the value of those assets 
and move those toxic assets off the books of financial 
institutions, reducing systemic risk and leaving the 
institutions with higher-rated assets. But if those toxic 
assets were over-valued across the board, due in part to 
failures in the ratings systems,\33\ then it is not clear that 
once Treasury has bought or guaranteed some securities that 
investors would want the remaining assets that Treasury had not 
purchased. Instead, investors may believe those assets remain 
toxic. Uncertainty--or skepticism--over the value of these 
assets would persist, making efforts to support the market 
largely unsuccessful.
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    \33\ See generally Gretchen Morgenson, Debt Watchdogs: Tamed or 
Caught Napping, N.Y. Times, Dec. 7, 2008, at A1.
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    In particular, Treasury needs to explain its understanding 
of the role played by each of the following factors and by 
their interaction: (1) capital inadequacy in financial 
institutions; (2) lack of reliable information in credit 
markets with respect to counterparty risk; (3) temporary 
liquidity shortfalls in particular financial markets; (4) 
falling real estate prices and rising foreclosure rates; (5) 
stagnant family incomes and rising unemployment; (6) changes in 
consumer borrowing capacity; (7) business and financial focus 
on short-term gains to the detriment of long-term growth; (8) 
effectiveness of regulatory oversight; (9) CPP participants' 
involvement in and exposure to off balance sheet vehicles and 
unregulated markets; and (10) broader long-term macroeconomic 
imbalances.
    If Treasury's understanding of the relative importance of 
these issues and their interaction with each other is changing, 
Treasury needs to explain how the dynamics of that process and 
how their actions have changed in response. If other factors 
are central to Treasury's thinking, those factors should be 
identified and clearly explained.
    The American people need to understand Treasury's 
conception of the problems in the economy and its comprehensive 
strategy to address those problems.

    2. Is the Strategy Working to Stabilize Markets? What 
specific metrics can Treasury cite to show the effects of the 
$250B spent thus far on the financial markets, on credit 
availability, or, most importantly, on the economy? Have 
Treasury's actions increased lending and unfrozen the credit 
markets or simply bolstered the banks' books? How does Treasury 
expect to achieve the goal of price discovery for impaired 
assets?
    American taxpayers need to know that their money is having 
a tangible effect on improving financial stability, credit 
availability, and the economy as a whole. As a first step, 
Treasury needs to provide a detailed assessment of whether the 
funds it has spent so far have had any effect--for better or 
worse--in these areas.
    It is difficult to disaggregate the effects of 
simultaneously-taken actions by the Federal Reserve, FDIC, and 
other entities from Treasury's actions. Nonetheless, the 
Oversight Panel believes it is a critical aspect of its mission 
to attempt to assess the role that Treasury's actions under the 
Act have played in the recent history of our economy.
    The GAO has suggested a number of potential metrics for 
evaluation: The TED spread (the difference between an average 
of interests rates offered in the London interbank market and 
Treasury bills), corporate spreads based on Moody's Aaa and Bbb 
bond rates, mortgage rates, mortgage originations, mortgage 
foreclosures and defaults, in addition to other metrics such as 
call report data, stock prices, and house prices.\34\
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    \34\ GAO, supra note 18, at 49-57.
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    Treasury itself should respond to the GAO report in part by 
attempting to define what the Department itself constitutes 
success. This is important in terms of assessing both whether 
changes need to be made in the Act and in terms of assessing 
when direct governmental participation in financial markets and 
financial institutions could be reduced.
    In recent days Treasury has commented favorably on 
developments in certain credit spreads such as the TED spread. 
Treasury has not, however, explained the role it believes 
interbank lending costs play compared to the importance of 
other factors in both the credit markets and the economy that 
appear to have deteriorated over the same time period, such as 
corporate bond spreads, Treasury default swap costs, and 
foreclosure data.
    The Oversight Panel intends over time to make its own 
assessment of the effectiveness of the TARP program in 
achieving the objectives set forth by Congress. The Oversight 
Panel would be greatly assisted in its effort if Treasury did 
the same.

    3. Is the Strategy Helping to Reduce Foreclosures? What 
steps has Treasury taken to reduce foreclosures? How effective 
have those steps been? Why has Treasury not generally required 
financial institutions to engage in specific mortgage 
foreclosure mitigation plans as a condition of receiving 
taxpayer funds? Why has Treasury required Citigroup to enact 
the FDIC mortgage modification program, but not required any 
other bank receiving TARP funds to do so? Is there a need for 
additional industry reporting on delinquency data, 
foreclosures, and loss mitigations efforts in a standard 
format, with appropriate analysis? Should Treasury be 
considering other models and more innovative uses of its new 
authority under the Act to avoid unnecessary foreclosures?
    Federal Reserve Board Chairman Bernanke recently reported 
that foreclosures in 2008 will number approximately 2.25 
million.\35\ Neighbors see their home prices decline from 
blighted nearby properties, and foreclosure sales saturate the 
real estate market with low-priced inventory, further pushing 
down home prices.\36\ Foreclosures also place a double burden 
on local governments, as they impose direct costs from crime 
and fires while eroding the local tax base. Global asset write 
downs and credit losses relating to home mortgages currently 
exceed $590 billion and may eventually rise to $1.4 trillion by 
some estimates.\37\ Moreover, foreclosure rates have continued 
to increase in recent months, and one in ten American mortgage 
holders are now in default or foreclosure.\38\ Rapidly rising 
unemployment is likely to increase mortgage defaults and drive 
foreclosure rates even higher. Several economists have 
identified the unresolved foreclosure crisis as a key causal 
factor in financial instability and economic decline.
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    \35\ Speech: Chairman Ben S. Bernanke At the Federal Reserve System 
Conference on Housing and Mortgage Markets, Dec. 4, 2008, available at 
http://www.federalreserve.gov/newsevents/speech/bernanke20081204a.htm.
    \36\ See Steve Matthews & Scott Lanman, Feds Kroszner Says 
Foreclosures Harming Middle-Income Areas, BLOOMBERG.COM, Dec. 3, 2008, 
available at http://www.bloomberg.com/apps/news?pid= 
20601213&sid=aSwRduPiiLjc.
    \37\ Yalman Onaran & Dave Pierson, Banks Subprime-Related Losses 
Surge to $591 Billion, Bloomberg.com, Sep. 29, 2008, available at 
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aSlW.imTKzY8; 
IMF Urges Collective Central Bank Action, Sydney Morning Herald, Oct. 
7, 2008, available at http://news.smh.com.au/business/imf-urges-
collective-central-bank-action-20081008-4w01.html.
    \38\ Hagerty & Soloman, supra note 5.
---------------------------------------------------------------------------
    As rising foreclosure rates continue to put downward 
pressure on home prices, financial institutions will be forced 
to recognize even greater losses. Each time a family loses its 
home due to foreclosure, the value of every home within one 
eighth of a mile declines nearly 1%.\39\ In 2002, when home 
prices were rising, researchers estimated that the holders of a 
loan are forced to recognize an average loss of $58,792 each 
time they foreclose on a home.\40\ Losses are much greater, 
however, when home prices are declining.
---------------------------------------------------------------------------
    \39\ Dan Immergluck & Geoff Smith, The External Costs of 
Foreclosure: The Impact of Single-Family Mortgage Foreclosures on 
Property Values, 17 Hous. Poly Debate 57, 69, 72, 75 (2006), available 
at http://www.fanniemaefoundation.org/programs/hpd/pdf/
hpd_1701_immergluck.pdf.
    \40\ Amy C. Cutts & Richard K. Green, Innovative Servicing 
Technology: Smart Enough to Keep People in Their Houses? (Freddie Mac, 
Working Paper No. 04-03, 2004), available at http://www.freddiemac.com/
news/pdf/fmwp_0403_servicing.pdf (citing Craig Focardi, Servicing 
Default Management: An Overview of the Process and Underlying 
Technology (TowerGroup, Research Note No. 033-13C, 2002)).
---------------------------------------------------------------------------
    Standard & Poor's, a ratings service, estimates that for 
subprime mortgages originated in 2006, servicers will only be 
able to recover 55% of the total value of the loan on a 
foreclosed home. Total losses include direct costs, such as 
legal fees and maintenance that average around 26% of the value 
of a loan, as well as losses from missed mortgage payments and 
declines in resale values.\41\ These losses are exacerbated by 
the fact that the resale value for a foreclosed home is often 
5% to 15% lower than the resale value of a comparable home sold 
by the homeowner.\42\
---------------------------------------------------------------------------
    \41\ Francis Parisi, The Anatomy of Loss Severity Assumptions In 
U.S. Subprime RMBS, Standard & Poors, available at http://
www2.standardandpoors.com/portal/site/sp/en/us/page.article/
4,5,5,1,1204835910066.html.
    \42\ Deep Dive into Subprime Mortgage Severity, Fixed Income 
Research Report, Credit Suisse, June 19, 2008.
---------------------------------------------------------------------------
    While Treasury has promoted voluntary mortgage assistance 
through its HOPE NOW program, it is unclear what effect this 
activity has had. Although there are data on the number of 
people who have contacted HOPE NOW, there appear to be no 
systematic data on the number of people who have negotiated 
reductions in either the principal amounts of their mortgages 
or in their monthly payments.
    Preserving homeownership is an explicit purpose of the Act. 
Under Section 109, the Treasury Secretary has the authority to 
``use loan guarantees and credit enhancements to facilitate 
loan modifications to prevent avoidable foreclosures.'' When 
the Act was passed, Congress expected the primary use of the 
authority under the Act to be to purchase troubled assets from 
financial institutions. In that context, Treasury is required 
to ``implement a plan to maximize assistance to homeowners'' 
and to encourage mortgage servicers to use the HOPE for 
Homeowners Program or loan guarantees and credit enhancements 
to facilitate loan modifications and prevent foreclosures 
``[t]o the extent that the Secretary acquires mortgages, 
mortgage-backed securities, and other assets secured by 
residential real estate.'' \43\ Given Treasury's shift to 
direct equity investments in financial institutions, the 
Department should explain how its broad authority still 
reflects the purposes of the act.
---------------------------------------------------------------------------
    \43\ Emergency Economic Stabilization Act, supra note 15, 
Sec. 109(a) (``the Secretary shall implement a plan that seeks to 
maximize assistance for homeowners and use the authority of the 
Secretary to encourage the servicers of the underlying mortgages, 
considering net present value to the taxpayer, to take advantage of the 
HOPE for Homeowners Program under section 257 of the National Housing 
Act or other available programs to minimize foreclosures.'')
---------------------------------------------------------------------------
    Treasury is reported to be considering a possible new 
proposal for reducing rates on fixed 30-year mortgages to as 
low as 4.5% by directing Fannie Mae and Freddie Mac to 
guarantee and purchase these low-rate mortgages.\44\ The low 
mortgage rate would be available only to those purchasing 
homes, not those who hope to refinance.\45\ The goal of such a 
program would be to encourage new buyers to enter the housing 
market. The program does not appear to offer any help to 
already distressed homeowners. Even if it were expanded to 
permit refinancing, the nearly 20% of homeowners who have 
negative equity in their homes will remain unable to refinance 
their mortgages.\46\
---------------------------------------------------------------------------
    \44\ Edmund L. Andrews, Washingtons New Tack: Helping Home Buyers, 
N.Y. Times, Dec. 5, 2008, available at http://www.nytimes.com/2008/12/
05/business/05housing.html.
    \45\ Id.
    \46\ See Dan Levy, More U.S. Homeowners Have Mortgage Higher Than 
House Is Worth, Bloomberg.Com, Oct. 31, 2008, available at http://
www.bloomberg.com/apps/news?pid=20601213&refer=home&sid=aYyk2_TLjGao.
---------------------------------------------------------------------------
    If Treasury believes that offering low interest rates on 
purchase-money mortgages to new homebuyers will help stem 
foreclosures among existing homeowners, then Treasury should 
articulate more clearly the process by which this will occur. 
Is there a substantial body of potential homeowners who could 
take advantage of these low rates, but who did not purchase 
homes on easy credit during the mortgage bubble? Will lower 
rates create a large enough pool of new home buyers to lead to 
a general increase in home prices? As importantly, are the 
assumptions underlying Treasury's plan still valid in a time of 
great economic uncertainty for the households that would be 
expected to take advantage of the lower mortgage rates? Will 
lower interest rates induce demand for home ownership in the 
face of falling housing prices, consumer uncertainty about the 
future of the economy and employment, and the reasonable 
expectation that an even better deal might be available in the 
future?
    Additionally, Treasury should explain what if any steps it 
is taking to encourage mortgage servicers, including affiliates 
of financial institutions that have received CPP or TALF 
funding, to engage in loan modifications, participate in the 
HOPE for Homeowners Program (in which none of the institutions 
receiving CPP funds have participated), or take other steps to 
minimize foreclosures. In particular, Treasury should explain 
why foreclosure relief was not a condition of CPP funds. 
Treasury should also consider the need for additional industry 
reporting on delinquency data, foreclosures, and loss 
mitigation in a standard format. Such data should be analyzed 
by an appropriate bank regulatory agency, to assess the 
effectiveness of each institution's efforts.
    As part of its aid to Citigroup, Treasury required 
Citigroup to implement the FDIC's mortgage modification 
program.\47\ Separately and not in connection with Citigroup, 
FDIC Chairman Sheila Bair has proposed a program that would 
provide additional incentives for loan modifications by paying 
servicers $1,000 to cover related expenses and by sharing up to 
50% of the losses on modified loans that subsequently re-
default.
---------------------------------------------------------------------------
    \47\ GAO Report, supra note 18, at 28.
---------------------------------------------------------------------------
    The FDIC estimates that such a plan could avoid 1.5 million 
foreclosures at a cost of $24.4 billion.\48\
---------------------------------------------------------------------------
    \48\ Federal Deposit Insurance Corporation, FDIC Loss Sharing 
Proposal to Promote Affordable Loan Modifications, Nov. 20, 2008, 
available at www.fdic.gov/consumers/loans/loanmod/.
---------------------------------------------------------------------------
    The Oversight Panel believes Treasury has an obligation to 
explain its objection to the FDIC proposal and why its 
objection to the FDIC proposal is not also relevant to 
Citigroup.

    4. What Have Financial Institutions Done With the 
Taxpayers' Money Received So Far? What have the companies who 
received money from Treasury done with the money? Have the 
companies used the funds in the way Treasury intended when it 
disbursed them? How have institutions supported under the 
Capital Purchase Program used their funds, and have they 
leveraged the capital support to increase lending activity? Is 
this different from the way funds were utilized for 
institutions who received funds pursuant to the Systemically 
Significant Failing Institutions plan? Is Treasury seeking to 
use TARP money to shape the future of the American financial 
system, and if so, how?
    In the course of its meetings with Treasury, the Inspector 
General of Treasury, and the staff of the Federal Reserve, the 
Oversight Panel has confirmed that the Office of Financial 
Stabilization has administered the TARP program without seeking 
to monitor the use of funds provided to specific financial 
institutions.\49\ Interim Assistant Secretary for Financial 
Stability Neel Kashkari has said that Treasury favors 
monitoring through ``general metrics'' that look at the overall 
economic effects of the disbursed funds.\50\
---------------------------------------------------------------------------
    \49\ See also GAO Report, supra note 18, at 25.
    \50\ Id., at 10.
---------------------------------------------------------------------------
    The decision to measure the efficacy of TARP through 
general economic metrics presents a difficult challenge. In the 
short run, it is impossible because systemic economic effects 
take time to manifest themselves. In the long run, such metrics 
are problematic because other actors such as the Federal 
Reserve, FDIC, and foreign governments are also taking 
aggressive action to address the crisis. Using general metrics 
could be a substitute for using no metrics at all, thus 
committing taxpayer resources with no meaningful oversight.
    If the funds committed under TARP have an intended purpose 
and are not merely no-strings-attached subsidies to financial 
institutions, then it seems essential for Treasury to monitor 
whether the funds are used for those intended purposes. Without 
that oversight, it is impossible to determine whether taxpayer 
money is used in accordance with Treasury's overall economic 
stabilization strategy. Treasury cannot simply trust that the 
financial institutions will act in the desired ways; it must 
verify.
    Such efforts to measure the impact of public funds on 
specific financial institutions have been underway in Great 
Britain. Chancellor of the Exchequer Alastair Darling and Lord 
Peter Mandelson, the Secretary for Business, Enterprise, and 
Regulatory Reform, have required recapitalized banks to lend to 
small and medium size enterprises.\51\ To demonstrate 
compliance with the intended purpose of recapitalization, 
Chancellor Darling and Lord Mandelson are using 2007 levels of 
lending as a comparison.\52\ Treasury should consider metrics 
it can use to measure compliance with the intended purposes of 
its funds.
---------------------------------------------------------------------------
    \51\ Jenny Booth, Darling to Order Recapitalised Banks to Lend to 
Small Businesses, Times (London), Oct. 21, 2008, available at http://
www.timesonline.co.uk/tol/news/politics/article4985470.ece; Press 
Release, Financial Support to the Banking Industry, HM Treasury, 
available at http://www.hm-treasury.gov.uk/press_100_08.htm.
    \52\ Press Release, Treasury statement on financial support to the 
banking industry, HM Treasury, Oct. 13, 2008, available at http://
www.hm-treasury.gov.uk/press_105_08.htm.
---------------------------------------------------------------------------
    The Oversight Panel believes the public has the right to 
know how financial institutions that have received public money 
are using that money. It also believes that Treasury should be 
responsible for holding individual institutions accountable for 
how they use the public's money.

    5. Is the Public Receiving a Fair Deal? What is the value 
of the preferred stock Treasury has received in exchange for 
cash infusions to financial institutions? Are the terms 
comparable to those received in recent private transactions, 
such as those with Warren Buffett and the Abu Dhabi Investment 
Authority?
    The Oversight Panel believes that a critical aspect of its 
mission is to determine whether the United States government 
has received assets comparable to its expenditures under the 
Emergency Economic Stabilization Act of 2008. To date, Treasury 
has made two types of expenditures under the Act. The majority 
of its expenditures have been cash infusions for which the 
Department has received preferred stock with associated 
warrants to purchase common stock. In the case of Citigroup, 
however, Treasury has participated, together with the Federal 
Deposit Insurance Corporation and the Federal Reserve Board, in 
a guarantee supporting a pool of assets held by Citigroup.
    Several major TARP recipient companies have received major 
capital investments recently, including Mitsubishi's investment 
in Morgan Stanley, Warren Buffett's investment in Goldman 
Sachs, and the Abu Dhabi Investment Group's investment in 
Citigroup.
    On October 14, 2008, Mitsubishi UFJ (MUFJ) Financial Group 
of Japan invested $9 billion in Morgan Stanley.\53\ In 
exchange, MUFJ received a 21% stake in the company through 
perpetual preferred shares with a 10% annual dividend.\54\
---------------------------------------------------------------------------
    \53\ Aaron Lucchetti, Propped Up, Morgan Stanley Now Sets Forth to 
Right Itself, Wall St. J., Oct. 14, 2008, at C1.
    \54\ Id.
---------------------------------------------------------------------------
    Warren Buffett announced on September 23, 2008 that he 
would invest $5 billion into Goldman Sachs.\55\ In return, 
Buffett's company, Berkshire Hathaway, received perpetual 
preferred shares with a 10% annual dividend. If Goldman Sachs 
wishes to buy back the preferred stock, it can do so at a 
premium of 10%. Berkshire Hathaway also received warrants to 
purchase common stock at $115 per share, up to $5 billion 
within the next five years.\56\
---------------------------------------------------------------------------
    \55\ Ben White, Buffett Deal at Goldman Seen as a Sign of 
Confidence, N.Y. Times, Sep. 24, 2008, at A1.
    \56\ Id.
---------------------------------------------------------------------------
    In November 2007, the Abu Dhabi Investment Authority 
invested $7.5 billion in Citigroup, amounting to 4.9% of 
Citigroup's equity.\57\ The Abu Dhabi Investment Authority 
received equity units that pay an 11% annual dividend and will 
be converted into common stock in 2010 or 2011 at a price 
between $31.83 and $37.24.\58\
---------------------------------------------------------------------------
    \57\ Eric Dash & Andrew R. Sorkin, Citigroup Sells Abu Dhabi Fund 
$7.5 Billion Stake, N.Y. Times, Nov. 27, 2007, available at http://
www.nytimes.com/2007/11/27/business/27citi.html?hp.
    \58\ Id.
---------------------------------------------------------------------------
    Under the CPP terms, Treasury receives senior preferred 
shares paying annual dividends of 5% for five years and 9% 
thereafter, and the shares can be redeemed at face value after 
three years or, if the institution receives a minimum amount 
from ``qualified equity offerings,'' prior to three years.\59\ 
In addition, Treasury receives warrants to purchase common 
stock up to a market value of 15% of senior preferred 
investment for public securities or 5% for private 
securities.\60\ The exercise price is the financial 
institution's market price of common stock on the day it is 
accepted into the Capital Purchase Program.\61\ The exercise 
price of the common stock warrants is reduced each six months 
if shareholder approvals are not obtained or if the institution 
completes a qualified equity offering prior to December 31, 
2009.\62\
---------------------------------------------------------------------------
    \59\ TARP Capital Purchase Program, Summary of Senior Preferred 
Terms available at http://www.treas.gov/press/releases/reports/
document5hp1207.pdf.
    \60\ Id.
    \61\ Id.
    \62\ Id., at 21-22.
---------------------------------------------------------------------------
    The Oversight Panel intends to work with Treasury, the GAO, 
and the Congressional Budget Office to determine the value of 
the preferred stock acquired by Treasury at the time of 
acquisition, particularly in light of these comparable 
transactions, and to understand how these terms were negotiated 
and determined. The Oversight Panel will also seek to 
understand Treasury's plans for the terms of future capital 
investments through the Capital Purchase Program in private 
financial institutions, S-Corporations, and mutual 
organizations.\63\
---------------------------------------------------------------------------
    \63\ See id..
---------------------------------------------------------------------------
    Under Section 102(c), the Secretary of the Treasury must 
collect premiums from financial institutions whose financial 
assets are insured, and those premiums must provide sufficient 
reserves to meet any anticipated claims and to ensure that 
taxpayer funds are safeguarded.
    Treasury, the Federal Reserve, and the FDIC announced on 
November 23 a plan to insure against the loss of $306 billion 
in loans and mortgage-related securities held by Citigroup.\64\ 
Under the plan, Citigroup will take the first $29 billion in 
potential losses, plus 10% of any additional losses.\65\ 
Treasury, the FDIC, and the Federal Reserve are responsible for 
any additional losses, which could be up to nearly $250 
billion.\66\ Citigroup will issue $4 billion in preferred stock 
to Treasury Department and $3 billion in preferred stock to the 
FDIC as a fee in exchange for the guarantee.\67\
---------------------------------------------------------------------------
    \64\ Press Release, Joint Statement by Treasury, Federal Reserve 
and the FDIC on Citigroup, Department of Treasury, Nov. 23, 2008, 
available at http://www.ustreas.gov/press/releases/hp1287.htm.
    \65\ Dan Wilchins & Jonathan Stempel, Citigroup Gets Massive 
Government Bailout, Reuters, Nov. 24, 2008, available at http://
news.yahoo.com/s/nm/20081124/bs_nm/us_citigroup.
    \66\ Id.
    \67\ Summary of Terms, Department of Treasury, Nov. 23, 2008, 
available at http://www.ustreas.gov/press/releases/reports/
cititermsheet_112308.pdf.
---------------------------------------------------------------------------
    In relation to the asset guarantees provided to Citigroup, 
Section 102 of the Emergency Economic Stabilization Act appears 
to govern all insurance policies and other guarantees of the 
value of financial institution assets. Section 102(c) requires 
that the Secretary of the Treasury collect premiums from 
financial institutions whose financial assets are insured 
through this program. The premiums must provide sufficient 
reserves to meet any anticipated claims and to ensure that 
taxpayer funds are safeguarded. The Oversight Panel will seek 
to understand whether the Citigroup guarantee falls under the 
requirements of Section 102, and if so, whether it conforms 
with these requirements.

    6. What is Treasury Doing To Help the American Family? Does 
Treasury believe American families need to borrow more money? 
Have Treasury's actions preserved access to consumer credit, 
including student loans and auto loans at reasonable rates? 
What restrictions will Treasury put on credit issuers to assure 
that taxpayer dollars are not used to subsidize lending 
practices that are exploitive, predatory or otherwise harmful 
to customers? What is Treasury doing to ensure that its 
spending is directed in ways that maximize the impact on the 
American economy?
    On November 25, 2008, Treasury announced that it would 
provide $20 billion of credit protection for the Federal 
Reserve's Term Asset-Backed Securities Loan Facility (TALF), 
which will finance investments in securities backed by 
automobile loans, credit card loans, student loans, and small 
business loans.\68\ In addition, since the beginning of the 
CPP, American Express became a bank holding company, allowing 
it to apply for a capital infusion of over $3 billion.\69\
---------------------------------------------------------------------------
    \68\ Press Release, Treasury Provides TARP Funds to Federal Reserve 
Consumer ABS Lending Facility, Nov. 25, 2008, available at http://
www.treas.gov/press/releases/hp1292.htm.
    \69\ Eric Dash, American Express To Be Bank Holding Company, N.Y. 
Times, Nov. 11, 2008, at B2.
---------------------------------------------------------------------------
    American families are already loaded with debt. According 
to Federal Reserve Board calculations, total U.S. consumer 
debt, excluding loans secured by real estate, increased at an 
average annual rate of 5.0% between 2003 and 2007, growing from 
approximately $2.1 trillion to approximately $2.55 
trillion.\70\ Total household debt outstanding in the U.S. now 
exceeds annual national personal income.\71\ According to the 
2004 Survey of Consumer Finances, 46% of American families 
carry monthly credit card balances, and the average level of 
credit card debt for those families is $5,100.\72\
---------------------------------------------------------------------------
    \70\ Statistical Release, Consumer Credit G.19, Federal Reserve, 
available at http://www.federalreserve.gov/releases/g19/current/.
    \71\ See Credit Cards and Bankruptcy: Opportunities for Reform, 
Hearing Before the Senate Comm. on the Judiciary, 110th Cong. (Dec. 4, 
2008) (testimony of Prof. Robert M. Lawless), available at http://
judiciary.senate.gov/pdf/08-12-04LawlessTestimony.pdf.
    \72\ 2004 Survey of Consumer Finances, Federal Reserve, available 
at http://www.federalreserve.gov/PUBS/oss/oss2/2004/
scf2004home_modify.html.
---------------------------------------------------------------------------
    The Oversight Panel believes that as the Treasury moves 
toward using public money to support the secondary market for 
credit card and other consumer debt, the Treasury, the public, 
and Congress need to understand better the financial strains 
affecting American families. While increased consumer spending 
is an important part of economic stimulation and recovery, for 
many families, incurring additional debt would only add to 
their financial stress. There is evidence that relying on 
borrowing by individuals as a form of economic stimulus has 
proved destructive. In addition, there are questions about the 
extent to which increased consumer spending stimulates the U.S. 
economy when marginal consumer dollars are spent on imports. 
Ultimately, sustainable consumer spending must depend upon 
rising incomes and broadly shared prosperity, not debt.
    In addition to the massive amounts of debt, the complexity 
of individual credit products has made it impossible for even 
the most sophisticated consumers to understand the implications 
of debt for their future payment obligations.\73\ The 
proliferation of intricate mortgage products--including hybrid 
ARMs, option ARMs, and other exotic species featuring teaser 
periods and balloon payments--contributed to the pattern of 
home buyers taking on mortgages that were initially affordable 
but that quickly became unmanageable. The Government 
Accountability Office reported that credit card issuers charge 
consumers up to three different interest rates depending on the 
transaction and high punitive rates (some in excess of 30%); in 
addition, average late payment fees have more than doubled 
between 1995 and 2005.\74\ From the onset of the financial 
crisis, credit card issuers have been accused of increasing 
interest, accelerating fees and penalties and using more 
aggressive debt collection practices.\75\
---------------------------------------------------------------------------
    \73\ See generally GAO, Credit Cards: Increased Complexity in Rates 
and Fees Heightens Need for More Effective Disclosures to Consumers, 
GAO-06-929, September 2006, available at http://www.gao.gov/new.items/
d06929.pdf.
    \74\ Id., at 5, 14, 18.
    \75\ See, e.g., Liz Moyer, Holiday Surprise: More Credit Card Fees, 
Forbes, Dec. 5, 2008, available at http://www.forbes.com/business/2008/
12/05/credit-card-fees-biz-wall-cx_lm_1205badcards.html; Abigail 
Bassett, As Debt Grows, Collections Boom, CNNMoney.com, Nov. 26, 2008, 
available at http://money.cnn.com/2008/11/25/pf/debt_collections/
?postversion=2008112611.
---------------------------------------------------------------------------
    In the context of consumer credit, it is also important to 
ask what restrictions Treasury will put on credit issuers to 
assure that taxpayer dollars are not used to subsidize lending 
practices that are exploitive, predatory or otherwise harmful 
to customers.
    In response to similar trends in the United Kingdom, the 
U.K. government has required credit card companies to work with 
consumers as a condition of receiving public funds. The U.K. 
has required credit card issuers to suspend payments for 60 
days in many cases of financial hardship.\76\
---------------------------------------------------------------------------
    \76\ U.K. Credit Cards to Give Borrowers Extra 60 Days to Pay, Wall 
St. J., Nov. 26, 2008, http://online.wsj.com/article/
SB122773056319560653.html.
---------------------------------------------------------------------------
    Households that are struggling with debts--mortgages, 
student loans, credit cards, car loans, payday loans, and other 
credit devices--are at the center of the current crisis. Their 
defaults have driven the losses on asset-backed securities that 
have weakened balance sheets of financial institutions, and 
their reduction in purchasing has contributed to the 
contraction in economic activity. For Treasury's disbursements 
to be effective in the context of the broader economic downward 
spiral, Treasury must have a strategy that addresses this 
underlying problem.

    7. Is Treasury Imposing Reforms on Financial Institutions 
That Are Taking Taxpayer Money? Congress has told the auto 
industry to reform its current practices before it could be 
considered for taxpayer aid and the British are requiring 
reforms on their banks as a precondition for capital infusions. 
Has Treasury required banks receiving aid to:
          i. Present a viable business plan;
          ii. Replace failed executives and/or directors;
          iii. Undertake internal reforms to prevent future 
        crises, to increase oversight, and to ensure better 
        accounting and transparency;
          iv. Undertake any other operational reforms?
    Treasury has provided capital to financial institutions 
under two programs, the CCP and SSFI. In general, the Act 
provides the Secretary of the Treasury with broad authority to 
set the conditions under which companies may receive aid. In 
particular, Congress required that the Secretary determine 
whether the public disclosure requirements for each financial 
institution are sufficient to provide the public with an 
accurate picture of that institution's true financial 
position.\77\
---------------------------------------------------------------------------
    \77\ Emergency Economic Stabilization Act, supra note 15, 
Sec. 114(b) (``the Secretary shall determine whether the public 
disclosure required for such financial institutions with respect to 
off-balance sheet transactions, derivatives instruments, contingent 
liabilities, and similar sources of potential exposure is adequate to 
provide to the public sufficient information as to the true financial 
position of the institutions. If such disclosure is not adequate for 
that purpose, the Secretary shall make recommendations for additional 
disclosure requirements to the relevant regulators.'')
---------------------------------------------------------------------------
    It is unclear whether there have been any efforts to assess 
the business plans, the management, or the accounting and 
general transparency of firms receiving aid from the CPP.\78\ 
In order for the Big Three auto companies--Ford, Chrysler, and 
GM--to be considered for any taxpayer aid, however, Congress 
has proposed considerable reforms and presentation of viable 
business plans.\79\ The British have imposed significant 
reforms on their banks in the context of government aid during 
the financial crisis. In exchange for recapitalization, the 
British Treasury has required that Banks maintain 2007 levels 
of lending to homeowners and small businesses, develop an 
effective scheme for people to stay in their homes, reform 
their compensation policies going forward, include the 
Government in decisions on dividend policy, and provide the 
Government with influence on the appointment of new independent 
non-executive directors.\80\
---------------------------------------------------------------------------
    \78\ See GAO Report, supra note 18, at 15.
    \79\ See David M. Herszenhorn, Big Bailout for Detroit Fails for 
Now, N.Y. Times, Nov. 21, 2008, at B1. Speaker Nancy Pelosi stated, 
``Until we see a plan where the auto industry is held accountable and a 
plan for viability on how they go into the future--until we see the 
plan, until they show us the plan, we cannot show them the money.'' Id.
    \80\ Press release, HM Treasury supra note 51; see also Steven 
Erlanger & Katrin Bennhold, Governments on Both Sides of the Atlantic 
Push To Get Banks To Lend, N.Y. Times, Nov. 7, 2008, at A6.
---------------------------------------------------------------------------
    The Oversight Panel believes the public has a right to know 
to what extent conditions have been imposed on financial 
institutions receiving public funds, and if not, why not.

    8. How Is Treasury Deciding Which Institutions Receive the 
Money? What factors is Treasury using to determine which 
institutions receive equity infusions, purchase of portfolio 
assets, or insurance of portfolio assets? Is Treasury seeking 
to use TARP money to shape the future of the American financial 
system, and if so, how? Why does Treasury believe that 
providing capital to all viable banks, regardless of business 
profile, is the most efficient use of funds?
    Treasury has informed both the Oversight Panel and the GAO 
that its process for determining which banks receive aid from 
TARP under the CPP is based on one criterion--the financial 
viability of the institution. In doing so, Treasury relies on 
recommendations from banking regulators to determine which 
institutions will receive equity infusions.\81\ Bank regulators 
consider bank examination ratings, selected performance ratios, 
and, in some cases, the intended use of capital injections.\82\ 
Treasury has stated that the process is consistent for all 
banks. Those with higher bank examination ratings are 
presumptively approved by the regulators, while those with low 
examination ratings are sent to the CPP Council, which may 
consider additional factors such as the existence of a signed 
merger agreement and private equity investment.\83\ Although no 
bank has been denied, some institutions have withdrawn their 
applications.\84\ As of December 9, Treasury had invested in 87 
institutions.\85\ Of these capital infusions, $115 billion has 
gone to 8 lenders.\86\
---------------------------------------------------------------------------
    \81\ Release: Interim Assistant Secretary for Financial Stability 
Neel Kashkari Testimony before the Senate Committee on Banking, Housing 
and Urban Affairs, Oct. 23, 2008, available at http://www.treas.gov/
press/releases/hp1234.htm.
    \82\ Id.
    \83\ Id.
    \84\ Id.
    \85\ Capital Purchase Program Transaction Report, Dec. 9, 2008 
available at http://www.treas.gov/initiatives/eesa/docs/
CPPTransaction%20ReportDec%209.pdf.
    \86\ Id.
---------------------------------------------------------------------------
    Some commentators are concerned that Treasury actions are 
designed to drive consolidation in the banking industry by 
directing funds to financial institutions that are willing to 
purchase weaker banks.\87\ Opponents of concentration worry 
about the too-big-to-fail dynamic encouraging excessive risk 
taking by surviving institutions.
---------------------------------------------------------------------------
    \87\ Mark Landler, U.S. Is Said To Be Urging New Mergers in 
Banking, N.Y. Times, Oct. 21, 2008, at B1.
---------------------------------------------------------------------------
    Others are concerned about too little thought about over-
supply in banking and the need to concentrate taxpayer 
resources on backing up a more limited number of stronger 
banks.\88\ Still others have expressed concern that with 
Treasury intervention, the banks that behaved prudently and 
whose balance sheets are strong are now losing their 
comparative advantage in a crisis.\89\ Finally, concerns have 
been expressed by some banks that their decision not to seek 
TARP money has been perceived as a sign of weakness by 
investors and business partners.
---------------------------------------------------------------------------
    \88\ See, e.g., Peter Cohan, Washington Likely To Put Capital Into 
Banks: A Great Idea if Done Right, BloggingStocks, available at http://
www.bloggingstocks.com/2008/10/09/washington-likely-to-put-capital-
into-banks-a-great-idea-if-don.
    \89\ See, e.g., E. Scott Reckard, Which Banks Live or Die? Wielding 
$250 Billion, U.S. May Decide, L.A. Times, Oct. 15, 2008, at A1; Nicole 
Gelinas, Storm Proofing the Economy, Wall St. J., Oct. 28, 2008, 
available at http://online.wsj.com/article/SB122513954599373277.html; 
Evan Greenberg, The Insurance Industry Doesn't Need Subsidies, Wall St. 
J., Oct. 31, 2008, available at http://online.wsj.com/article/
SB122541594014986703.html.
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    The Citigroup experience and the AIG experience raise 
questions about assessments of institutional health and need by 
Treasury and bank regulators. In assessing the health of 
financial institutions, the Oversight Panel is interested in 
the extent to which Treasury and bank regulators involved in 
funding decisions have assessed future likely losses in 
derivatives and troubled assets, and the implications for 
funding levels necessary to restore specific institutions to 
the point where they can resume normal lending practices.
    The Oversight Panel believes it is critical for Congress 
and the public, including participants in the banking industry, 
to understand exactly what the criteria are for receiving money 
under the TARP programs, what the strategic intentions of the 
criteria are, if any, what the strategic effects of the 
criteria are, and how the criteria advance the purposes of the 
Act.

    9. What is the Scope of Treasury's Statutory Authority? 
What is Treasury's understanding of the statutory limits on its 
use of funds? How does Treasury justify its decisions under the 
Act in relation to its view of these limits? How is Treasury 
carrying out its statutory mandate regarding credit insurance?
    The Emergency Economic Stabilization Act of 2008 granted 
the Secretary of the Treasury the authority both to purchase 
and to insure ``troubled assets'' held by ``financial 
institutions.'' \90\ Moreover, the Act defines ``troubled 
asset'' as any residential or commercial mortgage-backed 
security and related assets issued before March 14, 2008, and 
``any other financial instrument that the Secretary, after 
consultation with the Chairman of the Board of Governors of the 
Federal Reserve System . . . determines the purchase of which 
is necessary to promote financial market stability'' so long as 
that determination is transmitted to Congress.\91\
---------------------------------------------------------------------------
    \90\ Emergency Economic Stabilization Act, supra note 15, at 
Sec. 101(a).
    \91\ Id., at Sec. 3(9).
---------------------------------------------------------------------------
    The term ``financial institution'' is defined as ``any 
institution, including but not limited to any bank, savings 
association, credit union, security broker or dealer, or 
insurance company.'' \92\ The remainder of the definition 
limits the definition to U.S. institutions not owned by a 
foreign government. Treasury has purchased the preferred stock 
of banks relying upon these definitions.
---------------------------------------------------------------------------
    \92\ Id., at Sec. 3(5) (emphasis added).
---------------------------------------------------------------------------
    Some have raised concerns that these purchases appear not 
to be contemplated by the overall language of the Act, and have 
questioned whether Treasury's interpretation of its authority 
in fact places any substantive limits on the assets it could 
buy, and from whom.
    On the other hand, others, contemplating Treasury's refusal 
to date to provide aid to U.S. automakers, have asked whether 
in light of Treasury's generally broad interpretation of its 
mandate, the refusal to aid the automakers, given their 
significant role in the financial markets and the economy, is 
arbitrary and not supported by the statute's broad definition 
of both ``troubled asset'' and ``financial institution.'' \93\
---------------------------------------------------------------------------
    \93\ See generally Greg Hitt, Auto Makers Force Bailout Issue--
Government Finds It Difficult to Deny Aid to Detroit in Wake of Wall 
Street Rescue, Wall St. J., Nov. 10, 2008, at A3.
---------------------------------------------------------------------------
    The Term Asset-Backed Securities Loan Facility (TALF) 
program, authorized by the Federal Reserve Act, features $20 
billion in TARP funds used to finance purchases of assets 
backed by auto, student, credit card, and small business loans, 
with any additional funding coming from the Federal Reserve 
Bank of New York (FRBNY).\94\ This program will provide up to 
$200 billion on a non-recourse basis to holders of assets 
backed by new and recent loans.\95\ Under the TALF terms, the 
first $20 billion comes from TARP and is subordinated to any 
additional funds provided by FRBNY.\96\
---------------------------------------------------------------------------
    \94\ Press Release, Federal Reserve, supra note 29.
    \95\ Id.
    \96\ TALF Terms and Conditions, Federal Reserve, available at 
http://www.federalreserve.gov/newsevents/press/monetary/
monetary20081125a1.pdf.
---------------------------------------------------------------------------
    The Citigroup loan guarantee discussed above similarly 
commits the TARP to a $20 billion investment in conjunction 
with guarantees offered by the FDIC and the Federal 
Reserve.\97\
---------------------------------------------------------------------------
    \97\ Press Release, Joint Statement by Treasury, Federal Reserve 
and the FDIC on Citigroup, Department of Treasury, Nov. 23, 2008, 
available at http://www.ustreas.gov/press/releases/hp1287.htm.
---------------------------------------------------------------------------
    It is unclear what Treasury believes its authority and 
obligations are surrounding guarantees in the context of the 
limits placed on insurance in Section 102 of the Act. It is 
also unclear what Treasury believes its limits are, if any, in 
working with other regulators and government bodies to jointly 
finance stabilization efforts. Lastly, it is unclear how 
Treasury intends to fulfill its obligation under Section 114 of 
the Act to ensure transparency when FRBNY is responsible for 
implementing the TALF.
    The Oversight Panel believes Congress and the public have a 
vital interest in understanding how far Treasury sees its 
authority under the TARP extending.

    10. Is Treasury Looking Ahead? What are the likely 
challenges the implementation of the Emergency Economic 
Stabilization Act will face in the weeks and months ahead? Can 
Treasury offer some assurance that it has worked out 
contingency plans if the economy suffers further disruptions?
    While there has been much discussion about the speed with 
which the financial system seemed to deteriorate, there were 
many signs of serious problems. Defaults rates on home 
mortgages had been rising, concerns had been raised about the 
quality of the commercial rating systems, distrust in the 
valuations of asset-backed securities had surfaced, and the 
extraordinary risks associated with unregulated (and 
unmonitored) credit default swaps indicated that our financial 
system was not unshakeable.\98\ While investors might be 
forgiven their focus on short-term profits, it is the job of 
our financial experts in the government to take the longer 
perspective, to be alert to the possibilities of shocks, and to 
have some thoughts about how those shocks might be addressed if 
they arose.
---------------------------------------------------------------------------
    \98\ See generally Matt Apuzzo, They Warned Us: US Was Told To 
`Expect Foreclosures, Expect Horror Stories', Associated Press, Dec. 1, 
2008, available at http://www.baltimoresun.com/business/nationworld/
sns-ap-meltdown-ignored-warnings,0,1683858.story.
---------------------------------------------------------------------------
    Even in the context of a massive crisis, we cannot manage 
one battle at a time. As we noted at the outset of this series 
of questions, we need to hear a coherent strategy for managing 
us out of this crisis. We note at the end of this series that 
we also need to think ahead, both to where the next failures 
may occur and to some principles which the government may 
follow by way of response.
    The Oversight Panel is very interested in the thinking of 
Treasury and the other agencies with which it coordinates, such 
as the FDIC and the Board of Governors of the Federal Reserve, 
as to what the implications for the TARP program are of 
possible future events such as the resetting of Alt-A loans, a 
possible bankruptcy of one or more major auto makers, or a 
change in the environment for financing TARP funding.\99\
---------------------------------------------------------------------------
    \99\ See e.g. Charles Feldman, Alt-A Loans: The Crisis Yet to Come, 
Biggerpockets, available at http://www.biggerpockets.com/renewsblog/
2008/05/20/alt-a-loans-the-crisis-yet-to-come; Bill Vlasic, G.M., 
Teering on Bankruptcy, Pleads for a Federal Bailout, N.Y. Times, Nov. 
12, 2008; Nouriel Roubini, Desperate Measures by Desperate Policy 
Makers in Desperate Times: the Fed Moves to Radically Unorthodox 
Policies as Economy Is in Free Fall and Stag-Deflation Deepens, RGE 
Monitor, Nov. 26, 2008, available at http://www.rgemonitor.com/roubini 
monitor/254591/
desperate_measures_by_desperate_policy_makers_in_desperate_times_the 
_fed_moves_to 
_radically_unorthodox_policies_as_economy_is_in_free_fall_and_ 
stagdeflation_deepens.
---------------------------------------------------------------------------
    This question connects to the first of our questions. 
Planning for the future requires an overall strategic approach 
to trying to address our financial and economic crisis. The 
Oversight Panel does not expect Treasury to predict the future. 
We are interested in learning more about how our government is 
planning for it.

                               ABOUT COP

    In response to the escalating crisis, on October 3, 2008, 
Congress provided the U.S. Treasury with the authority to spend 
$700 billion to stabilize the U.S. economy. Congress created 
the Office of Financial Stabilization (OFS) within Treasury to 
implement a Troubled Asset Relief Program (TARP). At the same 
time, Congress created a Congressional Oversight Panel (COP) to 
``review the current state of financial markets and the 
regulatory system.'' COP is empowered to hold hearings, review 
official data, and write reports on actions taken by Treasury 
and financial institutions and their effect on the economy. 
Through regular reports, COP must oversee Treasury's actions, 
assess the impact of spending to stabilize the economy, 
evaluate market transparency, ensure effective foreclosure 
mitigation efforts, and guarantee that Treasury's actions are 
in the best interest of the American people. In addition, 
Congress has instructed COP to produce a special report on 
regulatory reform that will analyze ``the current state of the 
regulatory system and its effectiveness at overseeing the 
participants in the financial system and protecting 
consumers.''
    On November 14, Senate Majority Leader Harry Reid and the 
Speaker of the House Nancy Pelosi appointed Richard H. Neiman, 
Superintendent of Banks for the State of New York, Damon 
Silvers, Associate General Counsel of the American Federation 
of Labor and Congress of Industrial Organizations (AFL-CIO), 
and Elizabeth Warren, Leo Gottlieb Professor of Law at Harvard 
Law School to the Oversight Panel. With the appointment on 
November 19 of Congressman Jeb Hensarling to the Oversight 
Panel by House Minority Leader John Boehner, the Oversight 
Panel had a quorum and met for the first time on November 26, 
2008, electing Professor Warren as its chair.
    This report was prepared under very tight time constraints. 
COP owes special thanks to Ganesh Sitaraman, Dan Geldon, John 
Beshears, and Cassie Walbrodt who helped with drafting, and 
Heather Slavkin and Catherina Celosse, who were careful 
editors. Students from the Harvard Law School provided critical 
research under tight deadlines; COP offers thanks to Neal 
Desai, Faisal Mohammed, Eric Nguyen, Jeff Pauker, Adam Pollet, 
Walter Rahmey, Saritha Tice and Ting Yeh for their service.

                      FUTURE OVERSIGHT ACTIVITIES


                            PUBLIC HEARINGS

    In the weeks ahead, COP will hold a series of field 
hearings to shine light on the causes of the financial crisis, 
the administration of TARP, and the anxieties and challenges of 
ordinary Americans. The first of these hearings will occur next 
week in Las Vegas, Nevada. At each hearing, COP members will 
conduct a thorough investigatory process on behalf of American 
taxpayers, consumers, and workers.

                            UPCOMING REPORTS

    Next month, COP will release two public reports. On Jan. 
10, it will release a report that examines the administration 
of the TARP program, including the impact thereof on the 
economy to date. On Jan. 20, COP will release a report 
providing recommendations for reforms to the financial 
regulatory structure. This report will provide a roadmap for a 
regulatory system that would revitalize Wall Street, protect 
consumers, and ensure future stability in our financial 
markets. Through these reports, the Oversight Panel will reveal 
the results of its investigations to the American people.

                PUBLIC PARTICIPATION AND COMMENT PROCESS

    COP will soon release a public website, which will provide 
resources pertaining to the financial crisis, the TARP program, 
and COP's ongoing efforts. The website will also offer 
opportunities for concerned citizens to share their stories, 
concerns, and suggestions with the Oversight Panel. By engaging 
in this dialogue, COP aims to enhance the quality of its ideas 
and advocacy on behalf of the American public.

   APPENDIX: STATUTORY AUTHORITY OF THE CONGRESSIONAL OVERSIGHT PANEL


              Emergency Economic Stabilization Act of 2008


                         Public Law No: 110-343


SEC. 125. CONGRESSIONAL OVERSIGHT PANEL.

    (a) Establishment.--There is hereby established the 
Congressional Oversight Panel (hereafter in this section 
referred to as the `Oversight Panel') as an establishment in 
the legislative branch.
    (b) Duties.--The Oversight Panel shall review the current 
state of the financial markets and the regulatory system and 
submit the following reports to Congress:
          (1) Regular reports.--
                  (A) In general.--Regular reports of the 
                Oversight Panel shall include the following:
                          (i) The use by the Secretary of 
                        authority under this Act, including 
                        with respect to the use of contracting 
                        authority and administration of the 
                        program.
                          (ii) The impact of purchases made 
                        under the Act on the financial markets 
                        and financial institutions.
                          (iii) The extent to which the 
                        information made available on 
                        transactions under the program has 
                        contributed to market transparency.
                          (iv) The effectiveness of foreclosure 
                        mitigation efforts, and the 
                        effectiveness of the program from the 
                        standpoint of minimizing long-term 
                        costs to the taxpayers and maximizing 
                        the benefits for taxpayers.
                  (B) Timing.--The reports required under this 
                paragraph shall be submitted not later than 30 
                days after the first exercise by the Secretary 
                of the authority under section 101(a) or 102, 
                and every 30 days thereafter.
          (2) Special report on regulatory reform.--The 
        Oversight Panel shall submit a special report on 
        regulatory reform not later than January 20, 2009, 
        analyzing the current state of the regulatory system 
        and its effectiveness at overseeing the participants in 
        the financial system and protecting consumers, and 
        providing recommendations for improvement, including 
        recommendations regarding whether any participants in 
        the financial markets that are currently outside the 
        regulatory system should become subject to the 
        regulatory system, the rationale underlying such 
        recommendation, and whether there are any gaps in 
        existing consumer protections.
    (c) Membership.--
          (1) In general.--The Oversight Panel shall consist of 
        5 members, as follows:
                  (A) 1 member appointed by the Speaker of the 
                House of Representatives.
                  (B) 1 member appointed by the minority leader 
                of the House of Representatives.
                  (C) 1 member appointed by the majority leader 
                of the Senate.
                  (D) 1 member appointed by the minority leader 
                of the Senate.
                  (E) 1 member appointed by the Speaker of the 
                House of Representatives and the majority 
                leader of the Senate, after consultation with 
                the minority leader of the Senate and the 
                minority leader of the House of 
                Representatives.
          (2) Pay.--Each member of the Oversight Panel shall 
        each be paid at a rate equal to the daily equivalent of 
        the annual rate of basic pay for level I of the 
        Executive Schedule for each day (including travel time) 
        during which such member is engaged in the actual 
        performance of duties vested in the Commission.
          (3) Prohibition of compensation of federal 
        employees.--Members of the Oversight Panel who are 
        full-time officers or employees of the United States or 
        Members of Congress may not receive additional pay, 
        allowances, or benefits by reason of their service on 
        the Oversight Panel.
          (4) Travel expenses.--Each member shall receive 
        travel expenses, including per diem in lieu of 
        subsistence, in accordance with applicable provisions 
        under subchapter I of chapter 57 of title 5, United 
        States Code.
          (5) Quorum.--Four members of the Oversight Panel 
        shall constitute a quorum but a lesser number may hold 
        hearings.
          (6) Vacancies.--A vacancy on the Oversight Panel 
        shall be filled in the manner in which the original 
        appointment was made.
          (7) Meetings.--The Oversight Panel shall meet at the 
        call of the Chairperson or a majority of its members.
    (d) Staff.--
          (1) In general.--The Oversight Panel may appoint and 
        fix the pay of any personnel as the Commission 
        considers appropriate.
          (2) Experts and consultants.--The Oversight Panel may 
        procure temporary and intermittent services under 
        section 3109(b) of title 5, United States Code.
          (3) Staff of agencies.--Upon request of the Oversight 
        Panel, the head of any Federal department or agency may 
        detail, on a reimbursable basis, any of the personnel 
        of that department or agency to the Oversight Panel to 
        assist it in carrying out its duties under this Act.
    (e) Powers.--
          (1) Hearings and sessions.--The Oversight Panel may, 
        for the purpose of carrying out this section, hold 
        hearings, sit and act at times and places, take 
        testimony, and receive evidence as the Panel considers 
        appropriate and may administer oaths or affirmations to 
        witnesses appearing before it.
          (2) Powers of members and agents.--Any member or 
        agent of the Oversight Panel may, if authorized by the 
        Oversight Panel, take any action which the Oversight 
        Panel is authorized to take by this section.
          (3) Obtaining official data.--The Oversight Panel may 
        secure directly from any department or agency of the 
        United States information necessary to enable it to 
        carry out this section. Upon request of the Chairperson 
        of the Oversight Panel, the head of that department or 
        agency shall furnish that information to the Oversight 
        Panel.
          (4) Reports.--The Oversight Panel shall receive and 
        consider all reports required to be submitted to the 
        Oversight Panel under this Act.
    (f) Termination.--The Oversight Panel shall terminate 6 
months after the termination date specified in section 120.
    (g) Funding for Expenses.--
          (1) Authorization of appropriations.--There is 
        authorized to be appropriated to the Oversight Panel 
        such sums as may be necessary for any fiscal year, half 
        of which shall be derived from the applicable account 
        of the House of Representatives, and half of which 
        shall be derived from the contingent fund of the 
        Senate.
          (2) Reimbursement of amounts.--An amount equal to the 
        expenses of the Oversight Panel shall be promptly 
        transferred by the Secretary, from time to time upon 
        the presentment of a statement of such expenses by the 
        Chairperson of the Oversight Panel, from funds made 
        available to the Secretary under this Act to the 
        applicable fund of the House of Representatives and the 
        contingent fund of the Senate, as appropriate, as 
        reimbursement for amounts expended from such account 
        and fund under paragraph (1).

                                  
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