Dancing with the Czars
Inspecting the Murky Bailout
| From Taxpayers for Common Sense, one of Washington DC’s best watchdog groups on government spending, we trim, blend, and append two 2009 articles in their Weekly Wastebasket: July 2 on Czars and July 24 on TARP. |
by Taxpayers for Common Sense
- Dancing with the Czars
By our count there are at least 31 active Czars. Thankfully, there’s also an Information Czar.
Czars are generally tasked with tackling challenging issues that are intractable for a reason: they involve tough questions, difficult trade-offs, and touch the lives of millions of Americans from all walks of life. Simply adding another layer of bureaucracy isn't going to change this fact.
These Czars occupy an exalted status in our government as part of the Executive Branch but not any agency. Unless expressly provided for by Congress, these officials are not confirmed by the Senate, yet often have power over Cabinet-level officials who are subject to confirmation.
When you are trying to manage large new initiatives, or when crisis situations develop (TARP Czar, Stimulus Accountability Czar) such positions may make sense on a temporary basis. But others, like the Drug Czar, have been in place through several administrations with a spotty track record.
Creating more Czars, instead of streamlining government and making it more efficient, runs the risk of papering over problems while keeping the creaking structure in place. What we need is to make government work. Only by reforming and managing the underlying bureaucracy can you affect long-lasting change.
- Inspecting the Murky Bailout
The federal bailout of the financial system has grown from a $700 billion program to purchase toxic assets to a dozen different programs representing nearly $3 trillion in risk to the taxpayer. According to the TARP Special Inspector General, the program is still hard to understand because it remains shrouded in secrecy.
Stepping beyond just the bailout, the potential scope of the federal government involvement in the economy is staggering. If you take the maximum taxpayer risk in all the support provided to the financial system -- TARP, Federal Reserve lending, Federal Deposit Insurance Commission, and other agencies -- you reach a staggering number -- $23.7 trillion. To be sure, this is a beyond-worst case number that assumes each entity taps every dime possible under the various programs and that taxpayers receive no value for assets purchased, but it is also a statement as to the size of the pile of chips the government has pushed into the pot. To date SIGTARP reports the aggregate level of support has been $4.7 trillion -- $1 trillion more than the annual federal budget.
Unfortunately for taxpayers, we’re still in the dark about our balance sheet. Special Inspector General for TARP, Neil Barofsky, testified to Congress that, Treasury “has repeatedly failed to adopt recommendations that … are essential to providing basic transparency” in TARP. He listed several recommendations ranging from reporting on the valuation of the assets in the TARP portfolio to requiring banks to report how they are actually using funds.
SIGTARP has conducted an audit of more than 360 banks that received a total of as much as $200 billion in bailout funds. Treasury argued that because money is fungible it is impossible to figure out where the additional money has gone. Working with the banks, however, SIGTARP documented that more than 80 percent of the respondents said the funds enabled them to continue or to increase lending and more than 40 percent added to their capital reserves to cushion against future losses. Some banks used the funds to pay off other loans, and some even acquired other financial institutions.
Obviously there are limitations on the study. For instance, banks were self-reporting and weren't required to specify how much money was spent on increased lending. But no matter, Treasury is still firmly against providing this data.
Barofsky also pointed to another troubling possibility. One of the myriad TARP programs is the Public-Private Investment Fund (PPIF), where Treasury has hired managers to purchase illiquid securities. SIGTARP is arguing that the firms conducting this activity must erect firewalls between the PPIF mangers and those working on the private side of these same firms to prevent any insider trading or advantage for the lucky few firms managing the PPIF portfolios. In addition, SIGTARP argues that information on holdings, trading activity, and asset valuation should be disclosed. They argue that failure to do this puts the public’s “fragile trust” in Treasury and the government at risk.
Since its inception, Treasury has promised to run TARP “with the highest degree of accountability and transparency possible.” Well … Barofsky argued, “Treasury’s default position should always be to require more disclosure rather than less and to provide the investors in TARP -- the American taxpayers -- as much information about what is being done with their money as possible.” It’s time for Treasury and TARP to level with the public.
JJS: While honest government does matter, it is hard for politicians and the elite to be honest with so much money at stake. A much deeper solution requires us to quit shoveling all our savings over to Wall Street and to quit letting land be an object of speculation. The latter we do by public recovery of the value of locations.
We could shift taxes off labor and capital, onto land, and use a goodly portion of the revenue to protect people from exorbitant land dues by paying ourselves a Citizens Dividend. Once we share the value of land, Wall Street and Main Street both won’t find it so worthwhile to speculate in land. That’d smooth out the business cycle, while getting a “rent share” would lift many into prosperity, so the rationale for Czars would wither.
Having worked wherever tried, it’s called geonomics.
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Jeffery J. Smith runs the Forum on Geonomics.
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Also see: Bankruptcy or Bailout to Nowhere?
http://www.progress.org/2008/cronyism.htm
Bankruptcy or Bailout to Nowhere? |
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