(CNSNews.com) - So far, the government has not been able to measure the effectiveness of the $700 billion bank bailout passed by Congress last fall, according to the Government Accountability Office (GAO), the investigative arm of Congress.
In fact, the GAO said it’s not yet possible to know exactly where the money is going, let alone the effectiveness of the Troubled Asset Relief Program (TARP), which was created last October when Congress authorized $700 billion to help financial markets.
“We are not actually sure how it (TARP) is functioning,” Tom McCool, director of the center of economics at GAO, told CNSNews.com. “Part of it is because of data limitations.”
The Emergency Economic Stabilization Act of 2008 requires the Comptroller General, who heads GAO, to report at least every 60 days on TARP's performance--including how well the program is performing, the disposition of assets and an accounting of TARP’s internal operations.
On Jan. 30, GAO released its second report on how the Treasury Department has been managing TARP, telling Congress that Treasury is still in the process of hiring staff for its Office of Financial Stability--and “still developing an oversight structure” for the program.”
On Feb. 5, Gene Dodaro, head of the GAO and acting comptroller general, testified before the Senate Committee on Banking, Housing, and Urban Affairs.
He acknowledged that in the time since the GAO released its first report on the bank bailout in December, the Treasury has “not fully exercised” GAO’s recommendations about providing information of how recipients are handling funds, but has taken a few steps in that direction.
One "step" government auditors want is a monthly survey of how each of the 20 largest recipients of TARP funds are using the money. Another is quarterly surveys of the rest of the institutions.
But Dodaro pointed out that this would only be the beginning of accountability for the program.
“While the monthly survey is a step toward greater transparency and accountability for the largest institutions,” Dodaro told the committee, “we continue to believe that additional action is needed to better ensure all participating institutions are accountable for their use of program funds.”
According to Dodaro, all institutions should report their use of funds on a monthly basis.
The GAO is planning to use the data of how recipients are using funds to measure whether the program is actually helping the economy--or making it more vulnerable to the current financial storm, McCool said.
“It [data] should give us a sense if it is working or not,” he said, “at least for those institutions.”
McCool added that the GAO is expecting the first data from the 20 institutions sometime this week.
In addition to accountability deficiencies, TARP suffers from “a lack of transparency,” and it has “no central vision,” according to Dodaro.
The GAO also noted that regulators will face difficulty in monitoring the program.
“It is unclear how OFS [Office of Financial Stability] and the regulators will monitor participating institutions’ use of the capital investments,” stated the first GAO report released in December.
It added that out of eight institutions that initially received funds from the program only two treated the funds separately from their other capital.
“With the exception of two institutions, institution officials noted that money is fungible and that they did not intend to track or report CPP capital separately,” the report said.