Fireworks at Congressional Oversight Panel as It Hints at Bank Nationalization

Keep an eye on a very scary Congressional Oversight Panel that is monitoring the Treasury's implementation of the Troubled Asset Relief Program (TARP). Yesterday they released their first report.

Here's how ABC began its coverage on the Panel's findings:

Though some economic measures are improving, the financial crisis "is far from over" and "appears to be taking root in the larger economy."

This, despite the government's commitment to spend trillions of taxpayer dollars on a massive bailout of the financial system.

These were the findings released in a report today by the Congressional Oversight Panel, the body charged with overseeing the government's Troubled Asset Relief Program, the $700 billion plan aimed at bailing out the country's financial sector

Ha! The Panel's report was completely over the top and could have been written by the ghost of Karl Marx. Two members of the five man panel dissented.

The panel was fairly forthright in its detailing on the amount of money being spent:

Over the last six months, Treasury has spent or committed $590.4 billion of the TARP funds. Treasury has also relied heavily on the use of the Federal Reserve’s balance sheet which has expanded by more than $1.5 trillion (not including expected TALF loans) in conjunction with the financial stabilization activities it has undertaken beyond its monetary policy operations. This has allowed Treasury to leverage TARP funds well beyond the funds appropriated by Congress.

The total value of all direct spending, loans and guarantees provided to date in conjunction with the financial stability efforts (including those of the FDIC as well as the Treasury and the Federal Reserve) now exceeds $4 trillion.

From there the panel went way beyond its monitoring mandate and caused two members of the five member panel to issue written dissents. Bizarrely, the five member panel monitoring steps implemented to fight a banking crisis includes an Associate General Counsel of the AFL-CIO. The head of the panel is Elizabeth Warren. Warren is a Harvard Law School professor and has collaborated with Americans for Fairness in Lending.(AFFIL)

AFFIL is "a non-profit organization designed to draw national attention to the unregulated lending industry in America. AFFIL’s ultimate goal is government regulation of the lending industry to protect American consumers from financial products which deplete assets and can lead to bankruptcy and foreclosure." AFFIL is an umbrella organization for groups working on lending and asset-building issues. Its official partners include: ACORN.

Thus, this panel is very strongly influenced by President Obama operatives. The AFL-CIO connection brings in Obama's union support and ACORN is, of course, the powerful grassroots organization, with strong government interventionist sympathies, that played an important role in the election of Obama.

The five members of the panels are:

Congressman Jeb Hensarling (R-TX), Richard H. Neiman, Superintendent of Banks for the State of New York, Damon Silvers, Associate General Counsel of the AFL-CIO, former U.S. Senator John E. Sununu (R-NH) and Elizabeth Warren, Leo Gottlieb Professor of Law at Harvard Law School

Following the detailing of the funds used by TARP to date, the panel suggested in their report that the downturn may be far from over and that "other methods" (read: bank nationalization) may be required to solve the financial crisis.

These suggestions added to the final draft caused Senator Sununu and N.Y. Superintendent of Banks Neiman to write dissents to the official report.

Sununu and Neiman jointly wrote (pdf):

...we are concerned that the prominence of alternate approaches presented in the report, particularly reorganization through nationalization, could incorrectly imply both that the banking system is insolvent and that the new Administration does not have a workable plan. The stakes for the American people are too high to permit any such misapprehensions to develop and intrude on successful outcomes that affect our national financial security.

Sununu also wrote (pdf) separately:

In producing monthly reports assessing the performance of programs under the Troubled Asset Relief Program (TARP), the Congressional Oversight Panel has worked effectively to build consensus among panel members. While it is unusual that any single panel member would fully agree with every sentence and statement in a comprehensive oversight report, in each previous case, I have found broad agreement with the sentiment and priorities pursued, and as a result, voted to support their release.

In reviewing the drafting of the April Oversight Report, however, it became clear that much of the content pursued topics which strayed far from the Panel’s core mission. Moreover, the April Report engages in a premature discussion of dramatic changes in Treasury’s chosen approach to supporting stabilization in the US financial markets. These and other concerns are more fully discussed in the joint additional views which I have submitted with Richard Neiman.

Oversight panel reports have been ignored in the past. Clearly, this report, which appears to suggest a major nationalization of the financial sector may be necessary, needs to be forgotten very quickly. Let's hope no one takes it seriously.