The Treasury Department has yet to establish rules on lobbying for its $700 billion Wall Street bailout, although the head of the program’s independent watchdog says he has found no undue outside influence that has affected the program.
An audit released Thursday by Neil Barofsky, the special inspector general for the Troubled Asset Relief Program (TARP), says the Treasury Department is in the final stages of drafting rules on lobbying for bailout money - more than 10 months into the program.
Treasury Secretary Timothy F. Geithner, when he took office in January, called for new rules to increase transparency and curtail potential lobbyist influence over the TARP decision-making process.
But the effort to increase transparency and control over lobbyists took a back seat because “other issues had consumed Treasury’s time and [had] taken precedence over completing the guidance,” the report said.
The pending lobbying rules, which are awaiting White House approval, are similar to those governing the $787 billion economic stimulus program, the audit says.
The new policy will prohibit Treasury employees from talking to lobbyists or members of Congress, with one exception - “instances of overarching policy discussions,” the report states.
But the report also found “little indication that external inquiries on [TARP] applications had affected the decision-making process” on how bailout money was doled out.
“No official stated that he or she received any inquiries regarding a specific applicant that they deemed inappropriate,” the audit said.
TARP was created in October to purchase “toxic assets” from major banks and other financial institutions. Two weeks into the program, the Treasury Department announced it would make more than $200 billion of the program’s money available to troubled financial institutions through purchases of preferred stock through its Capital Purchase Program (CPP).
The 38-page audit studied 56 financial firms that applied for CPP aid and had been the subject of “external inquiries,” such as calls or letters from members of Congress. Of those, 16 received money, 26 did not and 12 were still waiting for a decision as of mid-June. Two firms didn’t apply.
The report found that three of the 16 funded institutions didn’t meet all the CPP “quantitative criteria” but received bailout money anyway based on “qualitative mitigating factors” considered by Treasury and banking agency officials.
More than 2,700 financial institutions had applied for CPP money by late July, with 660 collectively receiving about $204 billion.
Treasury officials estimate that about 120 applications have been preliminarily approved for CPP aid but have not been funded, while about 40 are pending review at the regulatory level. The deadline for applications is Nov. 21.