Take a two minute break and read this, but afterwards get back to work, we need to increase productivity so that they can tax us some more…
TARP Fraud Could Cost Taxpayers Billions - WatchdogLast update: 2/24/2009 11:33:13 AM
By Michael R. Crittenden
Of DOW JONES NEWSWIRES
WASHINGTON (Dow Jones)–Fraud tied to the U.S. government’s rescue of the financial system could cost taxpayers tens of billions of dollars, in part because the Treasury Department is still developing internal controls for the program, government watchdogs will warn lawmakers Tuesday. Neil Barofsky, the special investigator general for the $700 billion Troubled Asset Relief Program, will testify before a House subcommittee that the U.S. government’s experience in the reconstruction of Iraq, hurricane relief programs, and the savings and loan bailout of the 1990s suggest the $700 billion rescue plan could be ripe for fraud. “History teaches us that an outlay of so much money in such a short period of time will inevitably draw those seeking to profit criminally,” Barofsky said in testimony for the afternoon hearing obtained by Dow Jones Newswires. Federal regulators have already seen evidence of alleged TARP-related crime. In late January, the Securities and Exchange Commission charged a Nashville-based firm with defrauding investors of at least $6.5 million by claiming their money was invested in the TARP and other securities that did not exist. “If, by percentage terms, some of the estimates of fraud in those programs apply to TARP programs, we are looking at the potential exposure of tens if not hundreds of billions of dollars in taxpayer money lost to fraud,” Barofsky said, noting that the total amount of money potentially at risk in TARP-related programs is approximately $2.875 trillion. The potential for fraud could be exacerbated by the Treasury Department’s lack of internal controls and oversight over the TARP and private contractors helping run the program. The Government Accountability Office, in testimony prepared for the same hearing, warned that the Treasury still has work to do to safely manage the rescue plan. Treasury “has yet to develop comprehensive written policies and procedures governing TARP activities or implement a disciplined risk assessment process,” Gene Dodaro, acting comptroller general of the United States, said in his testimony. Dodaro said that Treasury has made progress in its oversight over independent contractors, but that the department has identified “high risk issues that still need attention.” This includes the use of “time-and-materials” contracts, which can “increase the risk of wasted government dollars without adequate oversight of contractor performance.” The comments come as the Obama administration and Treasury Secretary Timothy Geithner face growing pressure to revamp the $700 billion rescue plan amid concerns that major banking institutions continue to falter despite the aggressive government intervention in the financial markets. This week, federal banking regulators began a series of “stress tests” at the largest U.S. banks to determine whether they need greater infusions of government funds to survive a sharper or longer economic downturn. The Treasury Department is expected to reveal details of the stress tests on Wednesday, and the parameters of other recently announced programs could be released later this week. The GAO’s Dodaro said that the Treasury’s frequently changing strategy for dealing with the financial crisis has hurt efforts to restore stability. The department has made only “limited progress” in communicating a strategic vision for the plan, instead responding to “institution- and industry-specific needs,” he said. “This lack of clarity has complicated Treasury’s ability to effectively communicate to Congress, the financial markets and the public,” Dodaro said. -By Michael R. Crittenden, Dow Jones Newswires; 202-862-9273; michael.crittenden@dowjones.com (END) Dow Jones NewswiresFebruary 24, 2009 11:33 ET (16:33 GMT)