Financial Crisis News Center

GAO Describes TARP Oversight Role

This story appeared in Bank Digest.

The Government Accountability Office explained its responsibility for overseeing the Troubled Asset Relief Program in a presentation for the Federal Deposit Insurance Corporation Auditing & Accounting Conference in Arlington, Va.

http://www.gao.gov/cghome/d10150cg.pdf

Treasury Responds to GAO TARP Reports

This story appeared in Bank Digest.

The Treasury Department has provided an updated response to the implementation of recommendations on the Troubled Assets Relief Program (TARP) issued by Government Accountability Office in the reports from December 2008, and January, March, June, and July 2009. Treasury's response identifies 13 open GAO recommendations and then provides a summary of Treasury's actions to address the specific recommendation.

GAO Renews Call for Transparency and Accountability in TARP

This story appeared in Bank Digest.

A Government Accountability Office report has recommended that the Treasury Department coordinate with the Federal Reserve Board and Federal Deposit Insurance Corporation to help ensure that the decision to extend or terminate the Troubled Asset Relief Program is considered in a broader market context and that it document and communicate the results of its determination. It also said that the Treasury should undertake a  “thorough review” of its estimated TARP funding needs and emphasized the need for the agency to carry out previous GAO recommendations.

GAO-10-16 at http://www.gao.gov/new.items/d1016.pdf

Federal Reserve Audit Bill Gains Steam in House

By Sarah Borchersen-Keto, CCH Washington News Bureau, Contributing Author, the CCH Federal Banking Law Reporter.

Legislation granting the Government Accountability Office (GAO) broad authority to audit Federal Reserve Board activities gained support from House Financial Services Committee Chairman Barney Frank, D-Mass., September 25, who said it should be included in Congress’ overall plan to reform financial regulation.

H.R. 1207, the Federal Reserve Transparency Act of 2009, was first introduced by its sponsor Rep. Ron Paul, R-Texas, in 1983. It calls for a full and complete audit of the Fed by the GAO. The bill currently has 295 co-sponsors in the House, and a recent poll showed that 75 percent of U.S. citizens support auditing of the Fed, according to Paul.

GAO Reports on TARP Funds Used to Support AIG

By Gregg D. Killoren, J.D., CCH State Banking Law Reporter, Bank Digest and Individual Retirement Plans Guide.

The Government Accountability Office has released a report concluding that the federal supports, including a portion of the Troubled Asset Relief Program, used to prop up American International Group Inc. (AIG) are helping to stabilize the company. However, the GAO states in the report, it is too early to tell whether AIG can restructure its businesses and repay the taxpayers.

GAO Analyzes Options for Fannie Mae and Freddie Mac

This story appeared in Bank Digest.

In determining what to do with the government sponsored housing enterprises (GSEs) Fannie Mae and Freddie Mac, Congress needs “to reevaluate the roles, structures, and performance of the enterprises, and to consider options to facilitate mortgage finance while mitigating safety and soundness and systemic risk concerns,” according to a GAO analysis. The GAO noted that there generally are three options available: maintain the GSEs as for-profit companies with government sponsorship, but with further restrictions on their activities; turn the GSEs into government agencies or corporations; or privatize or end the GSEs. The GAO said the GSEs had “a mixed record” in meeting their objectives and had lately been subject to “capital and risk management deficiencies.”

GAO Report Critical of Agencies’ Fair Lending Efforts

This story appeared in Bank Digest.

House Financial Services Committee members Reps. Al Green, D-Texas, Maxine Waters, D-Calif., and Luis V. Gutierrez, D-Ill., and Committee Chairman Barney Frank, D-Mass., have released a Government Accountability Office report that is critical of federal regulators' ability to effectively and efficiently enforce the nation's fair lending laws. In the report, the GAO found that “[f]ederal enforcement agencies and depository institution regulators face challenges in consistently, efficiently, and effectively overseeing and enforcing fair lending laws due in part to data limitations and the fragmented U.S. financial regulatory structure.”

Mortgage Reform Would Have Protected Borrowers

This story appeared in Bank Digest.

The Government Accountability Office has issued a report that found provisions in a 2007 mortgage reform bill (H.R. 3915) would have strengthened borrower protections. However, the GAO noted that views on the long-term impact of the protections differed. For example, mortgage industry officials generally said that the bill’s safe harbor, securitizer liability, and other provisions would have limited mortgage options and increased the cost of credit for nonprime borrowers. In contrast, consumer groups generally stated that the mortgage reform would have protected consumers from predatory loan products.

GAO 09-741 at http://www.gao.gov/new.items/d09741.pdf

Statutory Changes May Have Increased Government Risk from Reverse Mortgages

This story appeared in Bank Digest.

Changes made by the Housing and Economic Recovery Act to the Department of Housing and Urban Development’s Home Equity Conversion Mortgage Program have encouraged lenders to offer reverse mortgages, but also have increased HUD’s exposure to losses, according to a Government Accountability Office report. The agency noted that the decline in housing prices and the increased loan limit may combine to require that HUD subsidize the program.

GAO-09-836 at http://www.gao.gov/new.items/d09836.pdf

JEC Examines Current Foreclosure Trends

This story appeared in Bank Digest.

Rep. Carolyn B. Maloney, D-N.Y., Chair of the Joint Economic Committee (JEC) held a hearing(webcast), entitled, “Current Trends in Foreclosures and What More Can Be Done to Prevent Them,” to investigate the ongoing foreclosures for non-prime borrowers in the residential housing market. At the request of Chair Maloney, the Government Accountability Office reported on previously undisclosed loan-level data, revealing current trends in the non-prime foreclosure crisis which continues to wreck havoc across the country. In addition, the JEC reviewed past federal regulatory failures and discussed efforts by the current Administration and Congress to reduce foreclosure rates, direct some of those borrowers into fixed rate FHA loans, and efforts to prevent a similar future crisis.