Financial Crisis News Center

GAO Audits OFS TARP Statements

This story appeared in Bank Digest.

Under the Emergency Economic Stabilization Act, the Secretary of the Treasury was authorized to implement the Troubled Asset Relief Program (TARP) and established the Office of Financial Stability (OFS). EESA requires the annual preparation of financial statements for TARP, and further requires GAO to audit these statements. GAO audited OFS's fiscal year 2009 financial statements for TARP to determine whether, in all material respects, the financial statements were fairly stated, and OFS management maintained effective internal control over financial reporting. GAO also tested OFS's compliance with selected provisions of laws and regulations. In the GAO's opinion, the OFS's fiscal year 2009 financial statements for TARP are fairly presented in all material respects. The GAO also concluded that, although internal controls could be improved, the OFS maintained, in all material respects, effective internal control over financial reporting as of Sept. 30, 2009. The GAO found no reportable instances of noncompliance with the provisions of laws and regulations it tested.

Financial Stability Reform Bill Clears House Panel

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

The House Financial Services Committee voted 31 to 27 December 2 in favor of a broad legislative package that targets systemic risk by allowing a new council of regulators to break up large, failing financial firms that are considered a risk to the economy. The bill also seeks to put an end to taxpayer bailouts of troubled institutions.

House Financial Services Committee Chairman Rep. Barney Frank, D-Mass., said he expects H.R. 3996, the Financial Stability Improvement Act, to move to the House floor next week for three days of debate, followed by a vote.

Support Sought for Fed Audit Amendment

This story appeared in Bank Digest.

Rep. Spencer Bachus, R-Ala., the ranking member of the Financial Services Committee, issued a statement during committee consideration of an amendment offered by Rep. Ron Paul, R-Texas, that would subject the Federal Reserve to audits by the Government Accountability Office (GAO): “Mr. Chairman, I strongly support the amendment offered by the gentleman from Texas. Members on both sides of the aisle can agree that Americans are tired of paying for Wall Street's mistakes with costly bailouts orchestrated under a veil of secrecy. Many of these bailouts have been funded by the Federal Reserve using its authority under Section 13(3) of the Federal Reserve Act. The Paul amendment will bring much needed accountability to the Federal Reserve by subjecting their interventions into the financial markets to a GAO audit. This amendment is based on H.R. 1207, a bi-partisan bill with 309 cosponsors in the House and 30 co-sponsors on Senate companion legislation.”

GAO Reports on Effects of Interchange Fees

This story appeared in Bank Digest.

Merchant costs for accepting credit cards have increased as consumers have used cards more often, according to a GAO Merchant costs for accepting credit cards have increased as consumers have used cards more often, according to a GAO report required by the 2009 Credit Card Accountability, Responsibility, and Disclosure Act. The agency attributed some of that increase to how Visa and MasterCard have competed for card issuers by increasing the number of interchange fee categories and the level of these fees. For some issuers, such as community banks, these fees generate significant revenue, and they also have been among large banks' most profitable activities. The report considers four options for reducing such fees but notes that implementation problems exist for each.

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.”