Bailout needs more oversight

Bailout needs more oversight

Miami Herald: Follow the money,” the source known as Deep Throat advised the reporters trying to figure out who was behind the Watergate break-in. That same advice would be useful for members of Congress trying to figure out whether the Treasury Department is doing a good job of using $350 billion in bailout money designed to stop the economic slide. As it turns out, though, tracking the Watergate money was a snap compared to finding out what Treasury officials did with the money from Congress.

In a scathing report last week, a panel overseeing the bailout said the Bush administration is apparently not keeping track of how all of the money is spent. Harvard Law School Professor Elizabeth Warren, who leads the five-member oversight board, told Congress the Treasury Department would not provide adequate answers to important questions, such as how the money will combat the rising tide of home foreclosures and Treasury’s overall strategy for the rescue.

Failure to track

The heart of the problem involves a failure to track the $189 billion invested so far in more than 250 banks in an effort to increase consumer credit and lending to businesses. The banking industry as a whole has been criticized for keeping the money to improve balance sheets rather than using it to offer credit.

It should not come as a surprise that the Treasury Department is handing out bailout money under the same “no accountability, no transparency” rules that governed Wall Street as the economy fell into ruin. Fortunately, a new set of managers takes over next week, but Congress must be clear about what it wants — and a lot tougher in making sure that it knows where the money goes.

President-elect Obama already has begun lobbying Congress to release the second half of the $700 billion from the Troubled Asset Relief Program as soon as possible. Congress should agree, giving the president a chance to get off to a running start when he takes over. But this time it must impose specific goals and measures of accountability.

“Trust but verify,” President Reagan used to say about arms-control agreements with the Soviet Union. The same notion should govern Congress’ actions as it goes about the business of handing out billions of dollars to save the economy.