House Moves to Improve Oversight on TARP

The federal bailout of banks and other financial institutions has received bipartisan support and bipartisan opposition. There are many who are displeased with how it was carried out,even among those who support it. Bush may have asked for the money but it was the leadership of both parties in the House and the Senate who pushed the legislation in its current form and accepted the refusal of particpating institutions to accept oversight or conditions. Members of the House and Senate worked last week to fix what is wrong with TARP. The work continues this week as the 15 day waiting period ends and the money is released.

It is important to understand that the Senate has already triggered the release of the second half of TARP funds. Once President Bush requested release of funds on behalf of the Obama administration a 15-day waiting period was triggered. The money is available unless Congress votes to deny the release of the funds. That bill was already defeated in the Senate. The 15-day waiting period is up this week.

On January 9, Rep. Barney Frank introduced H.R. 384, a bill intended to offer avenues for more oversight of the second half of the TARP money. This not only provided opportunity for debate, but it also offered opportunity for both parties to work together on amendments making this bill a much more bipartisan effort than we've seen in the past. The title of the bill is very simple:

To reform the Troubled Assets Relief Program of the Secretary of the Treasury and ensure accountability under such Program.

The full text is found here. Basically, H.R. 384 gave members of the House the opportunity to outline improvements to TARP through additional requirements and through oversight.

The following are the amendments offered:

Amendment 1 - Rep. Barney Frank, D-MA - Rep. Frank offered an amendment to his own bill to clarify certain language within the original bill. Details can be found here. This amendment was agreed to with a final vote of 275 - 152.

Amendment 2 - Rep. Doris Matsui, D-CA - Rep. Matsui offered an amendment that was agreed to by voice vote that reads:

to provide a sense of Congress stating that TARP participants, who receive from future TARP funds, should not initiate a foreclosure proceeding or foreclosure sale on any principal homeowner until the new systematic loan modification plan is implemented and deemed fully operational by the Secretary and Chair of FDIC.

Amendment 3 - Rep. Jeb Hensarling, R-TX - Rep. Hensarling proposed to weaken the oversight capabilities outlined in H.R. 384 by proposing an amendment intended

to remove the Secretary's authority to delegate an observer to attend meetings of the board of directors of any assisted institution.

Rep. Hensarling apparently thinks the companies being bailed out can police themselves. His amendment failed by a vote of 151 - 274.

Amendment 4 - Rep. Rush Holt, D-NJ - Rep. Holt proposed the amendment

to amend the EESA to require that, provided TARP funds are not used for their purchase, the Secretary shall facilitate an auction of troubled assets by third party purchases and, if such auction does not take place within 3 months from enactment, the Secretary must report to Congress on the mechanism the Secretary deems best to use to value and liquidate such assets.

Rep. Holt withdrew his amendment and there was no vote.

Amendment 5 - Rep. Michele Bachmann, R-MN - Rep. Bachmann offered an amendment

to eliminate changes and additional funding for the HOPE for Homeowners program.

The amendment failed by a recorded vote of 142 - 282. Apparently Bachmann believes her free market buddies - the banking and real estate industries - did such a good job of helping first-time homeowners we no longer need the HUD program intended to help folks avoid foreclosure.

Amendment 6 - Rep. Patrick Murphy, D-PA - Rep. Murphy proposed an amendment

to require the Federal Reserve to disclose detailed information regarding the Federal Reserves Mortgage-Backed Securities purchase program.

The amendment was agreed to unanimously with a recorded vote of 426-0.

Amendment 7 - Rep. Sue Myrick, R-NC - Rep. Myrick proposed an amendment

to prohibit TARP fund recipients from outsourcing new customer service or call center jobs to foreign companies.

The amendment was agreed to by voice vote.

Amendment 8 - Rep. Barney Frank for Rep. Tim Walz, D - MN - The proposed amendment would

require that any assisted institution publicly report, not less than quarterly, on the institution's use of the assistance, and would require the Treasury to make those reports readily available online.

The amendment was agreed to by voice vote.

Amendment 9 - Rep. Jeff Flake, R-AZ - Rep. Flake proposed an amendment

to clarify that the TARP Special Inspector General has oversight power over any actions taken by Treasury under this legislation that he deems appropriate, with certain exceptions.

The Flake amendment was agreed to by voice vote.

Amendment 10 - Rep. Maurice Hinchey, D-NY - Rep. Hinchey proposed an amendment

to require Treasury to immediately obtain information from recipients of TARP funds and their precise use of funds allocated prior to January 1, 2009, and require the Treasury to conduct an analysis of the use of those funds within 30 days of enactment.

Rep. Hinchey's amendment was agreed to with a recorded vote of 427-1.

H.R. 384 passed in the House, was read twice on the floor of the Senate and referred to the Senate Committee on Finance. We'll know soon whether the Senate will take the ball and run with it or if it will linger in committee never to be heard from again.