Special Inspector General for TARP Neil Barofsky says that the U.S. Treasury Department needs to improve how it records negotiations with companies that have received taxpayer bailouts to ensure that the bailed-out firms are complying with the conditions set to receive aid.
The Treasury Department, which manages the $700 billion Troubled Asset Relief Program, “does not have established guidelines or internal controls” for negotiations over warrants sold back to bailed-out companies, wrote Barofsky. “Without taking steps to address these issues, Treasury may open itself to criticism that, through TARP, it favors some institutions over others.”
In his quarterly report to Congress, Barofsky reiterated his earlier recommendations that the Treasury Department ensures companies are complying with their agreed-to conditions to participate in TARP. He also reiterated a complaint about the government’s home loan modification program, known by many as HAMP, is not helping enough home owners.
HAMP, a $50 billion program setup by Congress to prevent foreclosures, pays mortgage servicers a $1,000 fee to reduce monthly payments and up to $3,000 more over 3 years as long as a borrower stays in the program. The program was originally targeted to reach more than 3 million homeowners. However, customers of large-cap banks have expressed general frustration about banks’ lack of competence and organization in approving HAMP modifications.
Congress first authorized the Troubled Asset Relief Program in October 2008 to prevent a collapse of the financial markets. Companies including Goldman Sachs Group Inc. (NYSE: GS), Bank of America Corp (NYSE: BAC), Wells Fargo & Co. (NYSE: WFC) and Citigroup, Inc (NYSE: C) all received funds and have since repaid the government. The Obama administration has stated that it will not extend TARP past its October 3rd expiration date.
