Many thanks to Andrew Leonard, a more adept web surfer than I, for tracking down Elizabeth Warren’s incendiary report to Congress on the disbursement to date of TARP funds. Unfortunately, it’s not only a PDF, but it’s also one which can’t be copy-and-pasted; I do hope that Warren posts the report online in HTML form very soon, to make it as accessible as possible. (She has a blog, she should use it.)
This report makes a clear-eyed and compelling case that Treasury really has no idea what it’s been doing so far; that policy decisions have been ad hoc and ill-thought-through; and that no one has spent much in the way of time or effort in terms of thinking seriously about what the ultimate purpose of the TARP is, and how best to achieve that end.
Today’s news does, however, answer one of Warren’s many question. Asks Warren:
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?
The question about Citigroup is answered today by Charles Duhigg:
On the weekend before Thanksgiving, Washington’s top financial regulators were gathered on a conference call to discuss the rescue of the banking giant Citigroup when Sheila C. Bair, the chairwoman of the Federal Deposit Insurance Corporation, interrupted with a concern.
Speaking from her home, Mrs. Bair 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. After a brief discussion, she got her way.
In other words, the answer to Warren’s question is, essentially, "Sheila Bair was on the right phone conference at the right time". Duhigg continues:
White House and Treasury officials argue that Mrs. Bair’s high-profile campaigning is meant to promote herself while making them look heartless. As a result, they have begun excluding Mrs. Bair from some discussions, though she remains active in conversations where the F.D.I.C.’s support is needed, like the Citigroup rescue.
I’ll pass on the question of whether Bair is guilty of self-promotion (in Washington! Imagine that!). But Bair and Warren do seem to be much more concentrated than Treasury on the big questions of how the TARP funds are going to help the economy as a whole, and individuals under severe financial strain. Treasury, by contrast, looks a bit like it’s following the Underpants Gnome strategy:
- Throw lots of money at the banks
The real problem here is not that Step 2 is undefined, it’s that Step 3 is undefined as well. If you don’t know what you’re trying to achieve, it’s really hard to achieve it.
If I were Tim Geithner, I’d be setting up a regular meeting with Elizabeth Warren right now, so at least the areas of agreement and the areas of disagreement could be clearly delineated and explained. The problem with today’s Treasury, and the reason why Neel Kashkari was given the third degree yesterday, is that it’s far too autocratic: it never feels any need to explain or talk about its decisions, or the philosophy which underlies them. I do hope that Geithner’s Treasury will be different.