[Congressional Record (Bound Edition), Volume 154 (2008), Part 17]
[Extensions of Remarks]
[Pages 24025-24026]
[From the U.S. Government Publishing Office, www.gpo.gov]


                          FINANCIAL OVERSIGHT

                                 ______
                                 

                           HON. VIRGINIA FOXX

                           of north carolina

                    in the house of representatives

                        Friday, October 3, 2008

  Ms. FOXX. Madam Speaker, I submit the following articles for the 
Record:

                 Overseers Plan for Unprecedented Task

                (By Joseph J. Schatz and Phil Mattingly)

       If the House clears the financial bailout package, the 
     federal government within weeks will be wielding new 
     authority to buy hundreds of billions of dollars worth of 
     mortgages.
       And thanks to provisions added by lawmakers during the past 
     two weeks, Congress would be ready to effectively oversee the 
     program.
       At least that's the plan.
       But in order to work, both the program itself and the 
     oversight entities that are supposed to hold it accountable 
     might require a significant infusion of financial markets 
     expertise--perhaps from firms that have collapsed during the 
     recent turmoil on Wall Street.
       The process of managing, implementing and contracting out a 
     huge program--in many ways akin to an investment bank located 
     in the Treasury Department--would present Congress with a 
     unique oversight challenge. Some suggest lawmakers would be 
     hard-pressed to keep track of what's going on.
       ``It's almost a retail operation, and you can't constantly 
     be coming back to some congressional board for oversight or 
     something like that,'' William Gale, director of the 
     Brookings Institution's economic studies program, said during 
     an Oct. 1 discussion on the bailout package. ``Mainly what's 
     going to happen, is Treasury is going to do it, and they'll 
     report back to the public now and then. But I just don't see 
     a strong role for oversight in all this, despite what people 
     say.''
       If the House follows the Senate's lead and clears the 
     package, the Treasury Department wants to begin buying 
     financial institutions' shaky assets ``as quickly as 
     possible.'' White House spokesman Tony Fratto said Thursday. 
     ``It's a complicated thing that they'll be trying to put in 
     place, and I'll let them explain it. . . . I think it's at 
     least weeks.''
       At its core, the bill would set up a Troubled Assets Relief 
     Program (TARP) at Treasury with authority to purchase 
     mortgages or mortgage-related securities. As requested by 
     Treasury Secretary Henry M. Palson Jr., Treasury could decide 
     whether those purchases occur through an auction process or 
     directly from a financial firm.
       ``There's a lot to work out and plan in terms of managing 
     that process,'' said Paul Wachtel, an economics professor at 
     the Stern School of Business at New York University.'' 
     Developing a bureaucracy that can do so well is not a simple 
     problem.''
       ``I think whomever is elected [president] in a month or so 
     ought to designate his secretary of the Treasury pretty 
     quickly,'' House Financial Services Chairman Barney Frank, D-
     Mass., said Thursday on CNBC.


                          Outside Help Needed

       The Treasury Department might contract out a great deal of 
     the work to stressed financial institutions--a possibility 
     that some watchdogs see as raising conflicts of interest. The 
     legislation would waive the normal federal contracting 
     process.
       ``For all of the oversight, there may not be much in the 
     form of accountability,'' said Gary D. Bass, founder and 
     executive director of OMB Watch. ``You have to consider the 
     possibility that some of the people who got us into this in 
     the first place are the people who will be getting these 
     jobs. Does it mean Goldman Sachs is now going to be arm-and-
     arm with the federal government?''
        And as it assembles its oversight operation, Congress 
     might also need to bring in help from Wall Street.
       The legislation passed by the Senate and awaiting House 
     action would set up three oversight functions.
       The first would be a board composed of the Treasury 
     secretary, the chairman of the Federal Reserve, the 
     commissioner of the Securities and Exchange Commission, the 
     Housing and Urban Development secretary and the Federal 
     Housing Finance Agency director. That panel would review such 
     things as appointments, how the Treasury Department 
     determines which assets to buy and how the purchases are 
     made.
       The bill would also create a bipartisan panel of two House 
     members and two senators that would submit reports to 
     Congress on the program's transparency, effectiveness and 
     market impact.
       But most of the oversight responsibility would fall on the 
     Government Accountability Office, an arm of Congress. The 
     bill would empower the GAO's top official, the comptroller 
     general, to set up an office within Treasury at Treasury's 
     expense to conduct detailed oversight including yearly 
     audits. The CAO would have access to all records, books and 
     accounts.
       That oversight office would be an enormous undertaking 
     likely to require a large number of new personnel with 
     significant financial acumen.
       All three oversight bodies would issue reports to a newly 
     established inspector general appointed by the president. 
     That person would have a $50 million budget and would 
     coordinate all audits and investigations.
       ``You would have to hire people with the kinds of expertise 
     [the government agencies] do not have at the current time,'' 
     said NYU's Wachtel, noting that could mean an influx of Wall 
     Street finance experts. ``The kind of people who understand 
     the structure of these securities would be helpful,'' Wachtel 
     said. ``That understanding is not widespread. . . . That's 
     one of the reasons we got to where we are.''
       Some outside observers are impressed by the accountability 
     Congress has tried to write into the legislation.
       ``They tried to build some accountability into this process 
     while still allowing for some free-form experimentation with 
     the program itself because they're not sure exactly how it's 
     run,'' Thomas Mann, a senior fellow at Brookings, said at the 
     Oct. 1 roundtable.
                                  ____


                  [From CQToday, Friday, Oct. 3, 2008]

                          Oversight Provisions


                            Oversight Board

       A Financial Stability Oversight Board would review the 
     Treasury Department's use of the authority granted to it by 
     the bill and the effect of the department's actions on 
     financial and housing markets. The board would also make 
     recommendations to Treasury regarding use of its authority 
     and would report any suspected fraud, misrepresentation or 
     malfeasance to the special inspector general for the program. 
     It also could appoint a credit review committee to evaluate 
     how Treasury exercises its authority to buy troubled assets.
       The board would consist of the chairman of the Federal 
     Reserve Board, the Treasury secretary, the director of the 
     Federal Housing Finance Agency, the chairman of the 
     Securities and Exchange Commission and the secretary of the 
     Department of Housing and Urban Development. The board would 
     report to appropriate congressional committees.
       The bill also would create a bipartisan panel of two House 
     members and two Senate members that would submit regular 
     reports to Congress dealing with the program's transparency, 
     effectiveness and market impact.


                GAO Oversight and Congressional Reports

       The bill requires the Government Accountability Office 
     (GAO) to conduct oversight of the activities and performance 
     of the program and to report every 60 days to Congress.
       Treasury would have to report to Congress 60 days after it 
     begins to exercise its new authority and every 30 days 
     thereafter. Reports would include an overview of actions 
     taken by the department, the actual obligation and 
     expenditure of the funds provided for administrative expenses 
     and a detailed financial statement. After Treasury buys $50 
     billion of troubled assets, it would have to provide another 
     report describing all of the transactions made during the 
     reporting period, the pricing mechanism for the transactions, 
     and justifications for the price paid for and the other 
     financial terms associated with transactions.
       Treasury would review the current state of the financial 
     markets and the regulatory system and submit a report on its 
     findings to Congress.


                           Inspector General

       An inspector general's office would be established to 
     conduct, supervise and coordinate audits and investigations 
     of the program. The inspector general--nominated by the 
     president and confirmed by the Senate--would submit a 
     quarterly report to Congress summarizing its activities and 
     the activities of the department under the bill, which would 
     provide $50 million for the office.
                                  ____


             [From Investor's Business Daily, Oct. 3, 2008]

                   [Government Is Too Big Not To Fail

              (By Ernest S. Christian and Gary A. Robbins)

       After years of faking it, the federal government has 
     finally hit bottom or, depending on

[[Page 24026]]

     how you look at it, ascended to its level of maximum 
     destructive incompetence.
       So here we sit in the autumn of '08, almost 79 years to the 
     day since the market crash of 1929, with the smell of panic 
     again in the air. An alarmed president and Congress are 
     flailing away, desperately trying to fix a financial crisis 
     originally caused and made worse by government meddling. And 
     with the election coming, the increasingly incongruous Barack 
     Obama looms in the foreground.
       As if Washington were not already doing too many things, 
     almost all badly, and in the process doing far more harm than 
     good, Mr. Obama wants to give government a vast array of 
     additional assignments that it is not competent to handle and 
     that taxpayers cannot afford.


                            Federal Meddling

       In the current instance of the bailout, even if Washington 
     does finally find some way of re-lubricating the credit 
     markets that its mistakes almost stopped, the systemic 
     problem of inept governmental interference in all aspects of 
     the economy will remain--and indeed will be magnified by the 
     rescue plan itself. The more crisis Washington causes and the 
     more ``emergency'' powers it assumes, the bigger and more 
     tangled are the webs it spins.
       After Congress spends the next year or so ``fixing'' the 
     problems in the financial industry--and casting blame on 
     everyone but itself--Washington likely will have all capital 
     markets and credit transactions under its thumb. It would 
     then be able to specify throughout the economy who gets 
     financing, what for, when and how much.
       Just imagine an Obama-Pelosi-Reid administration (OPRA) 
     allocating credit and investment among companies according to 
     how green they are, who their shareholders are and whether 
     some federal oracle thinks they are just and fair. Never mind 
     quality and efficiency or ability to repay. Similar ``let's 
     pretend'' standards for allocating credit are exactly what 
     led to the home mortgage debacle in the first place.
       With other made-in-Washington crises already on track to 
     occur--think energy, entitlements, debt and the dollar--soon 
     every aspect of American life may be under strict federal 
     supervision, with a trajectory pointed downward.
       The more government interferes in private matters, the more 
     the economy and society as a whole take on the debilitating 
     characteristics of government. Costs go up, efficiency and 
     quality go down, output falls, corruption and waste increase.
       Washington is already increasing its participation in the 
     health care industry. That is the reason costs are so high. 
     Inevitably, it will take complete control and, when it does, 
     quality will plummet.
       Government has been messing about in the housing industry 
     for decades. Obviously, it has already made a hash of it, but 
     the worst is probably yet to come. Washington's energy policy 
     has long been to restrict supply and raise prices. Now the 
     government also has a plan to bring all energy consumers 
     under its supervision and control. It is called cap and 
     trade.
       Because of destructive federal regulations and taxes on 
     U.S. plant and equipment as well as on exports, America no 
     longer has an economy that primarily makes and sells things. 
     By default, manufacturing is being displaced by a 
     ``knowledge'' industry--and most Yankee ingenuity is devoted 
     to creating innovative financing techniques such as 
     derivatives and securitized subprime mortgages. Like 
     government, work consists of shuffling paper (electronically, 
     of course).


                            Our Way of Life

       Through its power over education and communications, 
     Washington already influences the creation and dissemination 
     of knowledge. Once it takes over the financial industry, 
     nothing will be left standing in the way of the federal 
     government's dominance. States and localities are mere 
     administrative units and dispersing agents for Washington. 
     Government has won its war against religion, sidelining 
     churches.
       In partnership with affiliated labor unions and a few 
     public-private corporations much bigger and worse than Fannie 
     or Freddie, Washington will more than ever be able to 
     participate in all aspects of the economy in a manner that 
     far more resembles the corporatist (or fascist) regimes of 
     Europe in the early 1930s than American capitalism.
       American capitalism is not just an economic theory. It is a 
     way of life where rewards are based on achievement, not 
     identify or class, and is therefore inextricably bound up 
     with individual freedom and American exceptionalism.
       The job of the next president and Congress, if it can 
     possibly rise to the occasion, is first stop the destructive 
     advance of government, then reverse it.

                          ____________________