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Bank Bailout: How Was The Money Spent?

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Although, hundreds of well-trained eyes are watching over the $700 billion that Congress last year decided to spend bailing out the nation’s financial sector, it’s still difficult to answer some of the most basic questions about where the money went.
Despite a new oversight panel, a new special inspector-general, the existing Government Accountability Office and eight other inspectors general, those charged with minding the store say they don’t have all the weapons they need. Ten months into the Troubled Asset Relief Programme, some members of Congress say that some oversight of bailout dollars has been so lacking that it’s essentially worthless.
“TARP has become a programme in which taxpayers are not being told what most of the TARP recipients are doing with their money, have still not been told how much their substantial investments are worth, and will not be told the full details of how their money is being invested,” a special inspector-general over the programme reported last month. The “very credibility” of the programme is at stake, it said.
Access and openness have improved in recent months, watchdogs say, but the programme still has a way to go before it’s truly transparent.
For its part, the Treasury Department said it’s fully committed to transparency, and that it’s taken unprecedented steps to report the status of TARP to the public. It regularly posts information on which banks have received money, as well as details about each of those transactions. Further, Treasury said, it doesn’t agree with all of its watchdogs’ recommendations, which it said could hamper the programme’s effectiveness.
TARP was passed in the midst of last fall’s financial meltdown as a way to keep American banks from falling deeper into the abyss.
The programme was controversial from the start. Its supporters say it’s helped spark bank lending in the country, but critics say it’s unfairly rewarded the big banks and Wall Street firms that pushed the economy to the brink.
The programme also has undergone a major transformation. When the Bush administration first went to Congress for the money, TARP’s main purpose was to buy up hundreds of billions of dollars in bad mortgages and so-called mortgage-backed securities that were bought and sold on Wall Street.
Today, TARP consists of 12 programmes that sent those hundreds of billions of dollars to big banks, but it’s also bailed out auto companies, auto suppliers, individuals delinquent on their mortgages, small businesses and American International Group, the big insurance company.
The watchdogs now must oversee the maze that TARP has become.
Just because a lot of people are watching, however, doesn’t mean they get everything they want to see.
One of the most prominent watchdogs is Elizabeth Warren, a Harvard Law School professor who chairs a TARP oversight panel created by Congress.
Her panel has released 10 major reports that examine TARP’s plans and policies, finding that much of the work by the Treasury and the Federal Reserve has been opaque, with unclear or contradictory goals.
One report took Treasury to task for vastly undervaluing more than $250 billion in transactions with the country’s major banks, and another suggested several ways to revamp federal regulation over the financial sector. Other reports have criticised the Treasury for its initial defensiveness in opening its books.
Despite its mandate, however, the panel doesn’t have subpoena power. That means it can ask, but can’t compel, officials from Treasury, the Federal Reserve or the nation’s banks to testify.
Henry Paulson, the Treasury secretary under former President George W. Bush, repeatedly stiff-armed the panel. Timothy Geithner, the current secretary, has been more open, but so far has testified just once before Warren’s group. Geithner is scheduled to appear again in September, and has agreed to do so quarterly, and two other senior Treasury officials also have appeared.
The relative lack of testimony from top officials, however, is one reason why critics of Warren’s panel think it hasn’t delivered on its promise.
In June, in an otherwise mundane congressional hearing, Republican Rep. Kevin Brady of Texas surprised Warren with an aggressive critique of the panel, saying it’s failed to help taxpayers understand what Treasury is doing with the billions at its disposal.
“There’s been very little value that the panel has brought to this issue or even insight on how these bailout dollars have been used,” he said. “I frankly believe at this point, given the reports that we’ve seen again with little value, I think the panel needs to be abolished.”
Warren defended the panel’s work, saying the lack of subpoena power means we “only have the capacity to invite” witnesses.
“So you asked Secretary Paulson in the first month of existence?” Brady asked.
“I believe we asked him repeatedly,” Warren said. “We asked him in our first month, in our second month, in our third month.”
Warren said she took the criticism seriously, dropping by Brady’s congressional office as soon as the hearing adjourned. The two had never met before, she said, and “I was really surprised,” by his comments.
“He said he felt frustrated,” she said. “He wanted us to be even blunter” in the panel’s reports.
Brady amplified his comments in an interview last month, saying that some of the panel’s work seem like a “PR ploy” and that “the moment has passed” for Warren’s group to play the role Congress envisioned.
His feelings have been partially echoed by two other members of the panel, Rep. Jeb Hensarling of Texas and former Sen. John E. Sununu of New Hampshire, both Republicans appointed by congressional GOP leaders (the other three members were appointed by Democrats).
Both have accused the panel of mission creep of straying from the central goal of determining exactly how, and how well, Treasury is doing its job.
Hensarling said that “taxpayers have not received answers as to whether the TARP programme works, how decisions are being made or what the banks are doing with the taxpayers’ money.” While he praises the “very smart people on the panel,” he said too many questions have been left unexplored.
He acknowledges that the lack of subpoena power makes things tough. “But even if we had it, I’m not sure we would have used it,” said Hensarling, who’s pushing to abolish TARP.
The other primary watchdog is Neil Barofsky, a special inspector-general named in November by Bush specifically to track TARP funds. His office does have subpoena power, and a growing staff that’s expected ultimately to have 160 people pursuing audits and criminal investigations.
It’s also made a series of recommendations to the Treasury, asking that it do more to reveal how TARP money is being spent. Treasury has adopted some of its recommendations, but rejected others including one of the most important: Giving taxpayers precise details on how TARP funds have been used by banks.
The recommendation involves one of the most visible aspects of TARP: investing $218 billion in 650 banks, helping them to strengthen their balance sheets and boost lending to American businesses and homeowners.
Barofsky’s office has long advocated that the Treasury require banks to detail how the TARP money they’ve received has been used. The department has refused, saying that once an investment is made in a big bank, it’s not possible to track how it’s used.
Barofsky’s office rejected that assertion, and did its own survey of 360 institutions, finding that most could say how they’d used the money.
“Treasury’s reasons for refusing to adopt this recommendation have been squarely refuted by the inspector general,” his office reported to Congress.

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Crude Hits Seven-Year High On Recovery Hope … Equity Rally Runs Out

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Crude oil hit a more than seven-year high yesterday on optimism that the global recovery will ramp up demand.
However, concerns about the end of long-running central bank support and rising Treasury yields saw most equity markets reverse early gains.
After an almost uninterrupted rally from the early days of the COVID-19 pandemic, world markets are showing signs of levelling out as global finance chiefs shift from economy-boosting largesse to measures aimed at reining in inflation.
Still, there is an expectation that equities will enjoy further gains this year as countries reopen and people grow more confident about travel, especially as studies suggest the more prevalent Omicron coronavirus variant appears to be milder and as vaccines are rolled out.
Analysts are also watching the corporate earnings season that is underway, with hopes that firms can match their stellar performances last year.
But while Asian markets started the day brightly after Monday’s travails, traders returned to selling, with US Treasury yields surging on expectations the Federal Reserve will have to unveil several interest rate hikes to tackle a worrying spike in inflation. Wall Street was closed Monday.
Tokyo, Hong Kong, Sydney, Seoul, Singapore, Taipei, Mumbai, Bangkok and Jakarta all fell.
There were gains in Shanghai in hopes of fresh economy-boosting measures, while Wellington and Manila also edged up.
London, Paris and Frankfurt all fell at the open.
But oil built on its early promise, with Brent climbing to $88.13 a barrel and WTI hitting $85.74, both levels not seen since October 2014.
The gains came thanks to demand optimism as the world reopens and concerns about Omicron ease. The loosening of travel restrictions in several countries has seen jet fuel costs soar.
Hopes for more monetary easing by major consumer, China, to reinforce its stuttering economy were also seen as key support for the oil market.

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NPA, MWUN, Others Synergise On Labour

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President General of Maritime Workers Union of Nigeria (MWUN), Comrade Adewale Adeyanju, has reaffirmed commitment to ensuring smooth working relationship with  management, Tin Can Island Port Complex (TCIPC) of the Nigerian Ports Authority (NPA) on labour related issues.
Adeyanju, who made the commitment during a working visit to the Port Manager, TCIPC, Mr. Buba Jubril, in Lagos, noted that the union will continue to promote industrial peace and harmony in the  operational activities at seaports.
Noting that synergy among all the maritime stakeholders was key for port efficiency, he hinted that the union has changed the narrative from being tagged as hooligans to a more responsible and civil Institution in the maritime industry.
Earlier, the Port Manager, TCIPC, Buba Jubril, thanked the  PG of MWUN for the systematic approach on labour related issues at the port level
Disclosing that the PG has been instrumental to the existing peace in port operations, Jubril assured on the existing synergy the port authority and all the unions.
Jubril further said that “ Myself and the President General MWUN has come a long in the industry.
“I have known him (PG) for over 33years and that will tell you that he is my friend and friend to management of the Nigeria port authority”, he said.

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Osinbajo Wants More Stakeholders’ Involvement In Blue Economy … Inaugurates Committee

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Vice President Yemi Osinbajo has sought for wider participation of relevant stakeholders in the blue economy project to deepen participation and benefits of Nigerians from the country’s marine resources.
Making the call at the  inaugural meeting of an Expanded Committee on Sustainable Blue Economy in Nigeria at the Presidential Villa yesterday, the Vice President said “a viable blue economy project will offer vista of opportunities not only for littoral states where there are bodies of waters, but for the entire country”.
He identified areas to be exploited to include ports, terminals, fishing, training, environment, tourism, power,oil and gas.
While identifying possible challenges of sustainability, the VP urged all the ministries, departments and agencies to strengthen their collaborations in an atmosphere of inter ministerial working groups and advised all members to attend the meetings faithfully for maximum results.
Osinbajo , who formally inaugurated the expanded committee, identified the need for a legal framework that will be more robust than other international maritime conventions on blue economy, which Nigeria has been signatory to.
He said the scope and participation of the committee will be further improved upon to accommodate more members from government agencies and relevant private sector stakeholders
“There is no doubt that the blue economy is a new frontier for economic development and a means of diversifying the economy through the use of resources from oceans, seas, rivers and lakes for the well being of the people.
“It also provides positive contribution to the achievement of the Sustainable Development Goals(SDGs) 2052 Africa Integrated Maritime Strategy (2052AIM) and the UN 2030 agenda
“This concept for economic diversification is promoted by the international community and provides friendly means of livelihood in line with this administration’s agenda on job creation’, he said.
He continued that “the ocean economy as an emerging economic frontier applies to ocean-based industry activities and the assets, goods and services of marine ecosystems.
“Countries have to define the scope of their blue economy based on their priorities. For example, in Bangladesh, the ocean economy consists of the following broad and growing economic sectors; living resources, minerals, energy, transport, trade, tourism and recreation, carbon sequestration and coastal protection.
“These industries and ecosystem services do not develop in isolation, but rather interact as an economic ecosystem”, the VP said.
Earlier in his remark,Transportation Minister, Rotimi Amaechi said the blue economy is capable of improving government revenue, create employments and grow the gross domestic product of Nigeria.
Amaechi, who was represented by the Permanent Secretary of the ministry, Dr Magdalene Ajani, also expressed optimism in the benefits derivable from a well exploited marine environment
Speaking at the event,  Dr. Paul Adalikwu, Secretary General of Maritime Organisation of West and Central Africa (MOWCA) lauded the initiative of the expansion while recommending inclusion of financial institutions such as the Central Bank of Nigeria (CBN) and African Development Bank (AfDB), as well as key financial institutions that will contribute meaningfully to realizing Nigeria’s Blue Economy objective.
In addition to  maritime agencies such as the Nigeria Ports Authority, Nigerian Maritime Administration and Safety Agency, and Maritime Academy of Nigeria, the expanded committee also include ten state governors.
They the Governors of Rivers, Lagos, Delta, Akwa Ibom, Borno, Ogun, Ondo, Cross River, Bayelsa and Edo States.
Other members are Ministers of Foreign Affairs, Power, Finance, Environment, Trade and Investment, Agriculture and Water Resources , Chief of Naval Staff, Comptroller General of Customs, Lake Chad Basin Commission, Nigeria Economic Summit Group, etc.

By: Nkpemenyie Mcdominic, Lagos

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