The Congressional Oversight Panel, assigned to oversee the TARP bailout and chaired by Harvard prof Elizabeth Warren, has released another of its monthly reports, this one on the federal bailout of GM and Chrysler. No surprise, the panel finds that once again the taxpayers are not getting the best deal. The money shot, so to speak:
Although taxpayers may recover some portion of their investment in Chrysler and GM, it is unlikely they will recover the entire amount. The estimates of loss vary. Treasury estimates that approximately $23 billion of the initial loans made will be subject to “much lower recoveries.” Approximately $5.4 billion of the loans extended to the old Chrysler company are highly unlikely to be recovered.
In other words, the taxpayers could lose up to $20 billion on the deal. But that’s not all. It turns out that the Treasury Department has not legally justified—at least, in public—its use of TARP dollars for the auto bailout:
[B]ecause of the unprecedented nature of the assistance provided to the automotive industry, the Panel also recommends that Treasury provide its legal analysis justifying the use of TARP funds for this purpose. This analysis will inform policymakers? and taxpayers? understanding of the potential for Treasury to use its authority to assist other struggling industries. Treasury must be clearer, more transparent, and more accountable in its TARP dealings, providing the American public with the information needed to determine the effectiveness of Treasury?s efforts.
Shouldn’t this have already been done? Yet looking at this and previous COP reports, it does seem as if the Treasury strategy has been bailout first, answer questions later.
The report also notes:
The Panel recommends that, to mitigate the potential conflicts of interest inherent in owning Chrysler and GM shares, Treasury should take exceptional care to explain its decisionmaking and provide a full, transparent picture of its actions. The Panel recommends that Treasury use its role as a significant shareholder in Chrysler and GM to ensure that these companies fully disclose their financial status and that the compensation of their executives is aligned to clear measures of long-term success. To limit the impact of conflicts of interest and to facilitate an effective exit strategy, Treasury should also consider placing its Chrysler and GM shares in an independent trust that would be insulated from political pressure and government interference.
Again and again, this panel has to remind Treasury to be transparent. The big question is, why does Treasury always need such a reminder?
You can follow David Corn’s postings and media appearances via Twitter.
