[Congressional Record Volume 155, Number 104 (Monday, July 13, 2009)]
[Extensions of Remarks]
[Pages E1740-E1741]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                              TARP PROGRAM

                                 ______
                                 

                        HON. DENNIS J. KUCINICH

                                of ohio

                    in the house of representatives

                         Monday, July 13, 2009

  Mr. KUCINICH. Madam Speaker, information is necessary for the proper 
functioning of our economy, as well as our political system. Investors, 
consumers and voters need quality information to make informed choices. 
Capitalism and democracy require full information for the most ideal 
outcomes, namely, efficiency and representativeness.
  But anyone looking at this past year in American business and 
government would have to conclude we are a long way from achieving the 
ideal. On the contrary, we are embroiled, in significant part, in the 
consequences of a profound lack of transparency. Our economic and 
political systems suffer an information deficit, and the lack of 
transparency is costing dollars as well as public trust.
  As chairman of an investigative subcommittee in the House of 
Representatives, my own work has largely been devoted to identifying 
and remedying that fundamental flaw.
  A couple relevant examples:
  My subcommittee held a hearing this past March on the questions, What 
does Treasury know about what TARP recipient banks are doing with the 
funds they've received? My staff identified a couple billion dollar 
examples. One bank arranged financing worth $8 billion for governmental 
entities in Dubai; another made a $7 billion investment in a Chinese 
Construction Bank, and a third made a $1 billion investment in its 
operations in India. None

[[Page E1741]]

of these are illegal, of course. They may even represent sound business 
judgment. But at the time those decisions were announced, those banks 
had received many billions of taxpayer dollars to help cure a liquidity 
crisis in the United States. Is that what Congress really had in mind 
when it created TARP? I think the answer is obvious.
  What we learned was that Treasury was making no significant effort to 
find out what federally-supported banks were doing. TARP program makes 
no demands on TARP recipients for detailed information about their 
spending. Even though the statute obligates Treasury to be able to 
prevent waste and abuse of TARP monies, Mr. Paulson's Treasury 
Department did not even bother to set standards for waste and abuse of 
TARP funds. ``We trust them'' was essentially what passed for oversight 
of the Capital Purchase Plan. Treasury has no concrete idea of how TARP 
monies are being used. They did not ask questions of TARP recipients 
about their use of funds, and did not gather sufficiently detailed 
information from TARP recipients to know what to ask about.
  It was even the opinion of Treasury that an answer to the question is 
nearly meaningless, because money is fungible.
  Of course money is fungible. So is gravel. But if you want to know 
where the gravel is, you look for roads. So to this end, one of our 
witnesses provided a detailed examination of lending practices by 
several top TARP recipients and found, as we have all since learned, 
that net new lending was nearly zero. By integrating not only new loans 
but also contraction in credit, in the form of foreclosures, shortened 
credit lines and so on, this witness was able to independently estimate 
actual new lending--one of the key purposes of the TARP capital 
infusions--something Treasury had been completely dependent on the TARP 
recipient companies for producing.
  I understand that Treasury has made some improvement in other TARP 
programs created since our hearing.
  Then more recently, my subcommittee has been engaged in an 
investigation of the circumstances around a merger that received 
considerable emergency assistance from Treasury and the Federal 
Reserve. Here too the transparency issue arose. One of the main 
problems the systemic regulators were trying to deal with was 
predictable investor surprise around the unexpectedly huge losses the 
merger was suffering. Our investigation found that unmistakable warning 
signs of those losses were known to the acquiring company before their 
shareholders were asked to ratify the merger, but the company did not 
share the information with its shareholders. Furthermore, our 
investigation showed that the Fed was completely aware of the possible 
securities fraud even as it was orchestrating a bailout to deal with 
the consequences of a misinformed investor community.
  Now the Fed is an interesting example of an institution that is 
statutorily protected from transparency. First a bit of background: As 
you know, Congress depends upon the Government Accountability Office to 
perform directed and statutorily required audits and reviews, which 
Congress uses as one important source of information and analysis for 
government oversight. But a little known statute called the Federal 
Banking Agency Audit Act of 1978 barred GAO from reviewing the Fed's 
monetary functions. Along comes the financial crisis and the Fed 
engages in a number of extraordinary measures, spends over $1 trillion 
dollars so far, invokes emergency powers to purchase and lend against 
assets it has never before held, and yet the Fed's interventions enjoy 
complete protection from GAO scrutiny of these crisis interventions 
because it calls them monetary policy. This is certainly debatable, and 
the Oversight and Government Reform Committee adopted unanimously my 
amendment to authorize GAO to conduct reviews of the special facilities 
created by the Fed to deal with the financial crisis. But we have a 
long and difficult road ahead before we see the Kucinich amendment 
become law, in spite of the fact that we are in a crisis due in 
significant part to the lack of transparency.
  So I will leave you with these thoughts: Our economy and our 
political system and its institutions are in severe need of greater 
transparency. We are living with the consequences of a lack of 
transparency. And yet, it will be difficult to administer the medicine 
we will all benefit from. I look forward to working with you to see 
that we get the transparency we desperately need.

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