In the forthcoming issue of Shelterforce is an item about Harvard law professor Elizabeth Warren, chair of the oversight panel formed to monitor the federal bailout for the ailing economy, and her conclusion that the government has thus far resorted to ad-hoc tactical solutions in dealing with the crisis, rather than creating a coherent strategy.
So when a report was released by the Congressional Oversight Panel for Economic Stabilization, it was not really a surprise that it was critical. If anything, it was an indication of how the Treasury Department’s handling of the bailout will be received in the weeks and months to come.
The report is replete with logical, and often obvious questions about the bailout that one would think would have been asked from the outset. For example, Number 1 on the panel’s list of questions is:
What is Treasury’s Strategy? What does Treasury think the central causes of the financial crisis are and how does its overall strategy for using its authority and taxpayer funds address those causes? What specific facts caused Treasury to change its strategy in the last two months? What specific facts changed that made the purchase of mortgage-backed assets a bad idea within days of the request and what specific facts changed again to make guaranteeing such assets a good idea a few weeks later?
Now, we can all see that that’s a whole litany of questions, and not really “one,” but nonetheless, these questions need to be addressed. At the same time, it’s sad that they need to be addressed at all.
Now, more in our purview is question Number 3:
Is the Strategy Helping to Reduce Foreclosures? What steps has Treasury taken to reduce foreclosures? Have those steps been effective? Why has Treasury not generally required financial institutions to engage in specific mortgage foreclosure mitigation plans as a condition of receiving taxpayer funds? Why has Treasury required Citigroup to enact the FDIC mortgage modification program, but not required any other bank receiving TARP funds to do so? Is there a need for additional industry reporting on delinquency data, foreclosures, and loss mitigations efforts in a standard format, with appropriate analysis? Should Treasury be considering others models and more innovative uses of its new authority under the Act to avoid unnecessary foreclosures?
Reporters should be asking these questions, in addition to government oversight panels.
The relation between FDIC and Citigroup, as outlined in the subquestion “Why has Treasury required Citigroup to enact the FDIC mortgage modification program, but not required any other bank receiving TARP funds to do so?” is particularly intriguing. Especially in light of an article in The New York Times that discusses the attention drawn to Sheila C. Bair, the FDIC chairwoman, when she declared that the “F.D.I.C. would contribute to a bailout only if Citigroup were forced to participate in a foreclosure prevention program she was championing on Capitol Hill.”
Bair has emerged as something of a champion in recent weeks as she has exercised her authority and escalated calls for using federal funds to modify default-threatened loans. Her advocacy, however, is causing problems between the White House and Treasury, according to the article.
These conflicts complicate progress, for sure, but let’s look at at the Congressional Oversight Panel for Economic Stabilization’s tenth question:
Is Treasury Looking Ahead? What are the likely challenges the implementation of the Emergency Economic Stabilization Act will face in the weeks and months ahead? Can Treasury offer some assurance that it has worked out contingency plans if the economy suffers further disruptions?
These are good questions, particularly since it would seem to be in everyone’s best interest that as the Bush administration hands the keys over the Obama administration, the economic rescue plan is, in fact, a plan.