Congress Misled by the Original Intention of the TARP" Hutchison Believes More Congressional Oversight" is Necessary
WASHINGTON D.C. Today U.S. Senator Kay Bailey Hutchison Texas senior Senator and a member of the Senate Banking Committee questioned Treasury Secretary Timothy Geithner about the broad interpretation of U.S. Department of the Treasury authorities and the need for greater congressional oversight of the Troubled Asset Relief Program.
HUTCHISON: Thank you Mr. Chairman. Mr. Secretary first I want to say that I think youve been very thoughtful and forthcoming today. Im not yet ready to say that I am going to give the Fed this new power but I think the points you made in your first answer were very compelling.
Im conflicted about the independence which I think has served us so well through the years but yet the potential compromising of that by going into more regulation. Secondly I think that your proposal is attempting to do something that is good Im not sure when the devilish details come out that it will be so but trying to level the playing field between banks and savings and loans surely one of your purposes and also streamlining the whole oversight of that. I think savings and loans have had a special place in our country and I want to make sure that we still have the services that they have been so able to give. They really started out as mortgages and evolved into more.
I also want to make the point that I agree with Senator Schumer who said something earlier today that was said to me by one of the great bankers in our state Tom Frost who is also now the biggest independent banker and has been very successful with the Frost Bank. He said as long as you dont require a person who originates a mortgage to keep part of it youre going to have a problems.
I think keeping a part of it in the originator is a very importance concept that we need to incorporate into a reform plus of course servicers and second servicers and how many iterations of that they have of that. I think we need to have skin in the game as it is described for everyone that is connected with a mortgage going forward.
I want to switch just for a moment for my question on TARP and that is to say everyone one of us who was here last Fall feels that we were misled by the original intention of the TARP which was to take the money to buy troubled assets in banks. Last year that was proliferating into other areas and it has continued into your administration as well. We now have eleven different programs none of which is buying assets of banks that are troubled.
My questions is this as Senator Bunning mentioned you will be able to sign a paper and extend TARP for ten months at the end of this year. And you said you werent sure you were going to. This is my question.
Do you believe that these eleven funds that have been a part of TARP that were not all a part of the original purpose of TARP should have more Congressional oversight? Im thinking of introducing legislation that would provide that and if so do you think it would be wise to be able to vote on all of the eleven new programs? Or if not what do you think would be the proper role of Congress because Im not comfortable with having been misled last year and currently going six or seven months plus another year with something that has no Congressional oversight.
GEITHNER: At the beginning of this administration we said that there were five areas that we thought would be appropriate to considering use the TARP authority that Congress provided. Those were to help address the housing crisis to make sure banks have capital where they need capital to help support bringing back the securitization markets targeted programs for small business lending and a program to help restart these markets for loans on the balance sheets of banks.
Now we have moved to put in place programs in each of those areas as we said we would do. Were on the verge of putting in place the last of those programs which is to create a set of funds to help restart these markets for the legacy assets.
These programs are subjected to an enormous amount of carefully designed oversight. Not just by the Congressional oversight panel you established under statute but also by a special inspector general at the Treasury and by the GAO. They report monthly on everything were doing.
We have been fully transparent about the specific terms underpinning each of these programs so that everyone can look at exactly what were doing and measure their impact and their success. We are looking very carefully at every recommendations those oversight bodies make for bringing more transparency and accountability to them. And where we think they make sense and we can do them we have adapted to those recommendations. We will keep doing that.
It is hard to know what will be necessary in the future in terms of using this authority if any further use would be required. My sense is that if we need to do more in the future that anything we do will fall within those core basic frameworks which to reduce them are about making sure the bank use them as capital…
