by Mathew Katz

Many of the banks that received TARP aid used it improperly, according to a report released today by the special inspector general charged with overseeing the program. In the report, special inspector general, Neil Barosky, found that 110 banks used the money not only to lend, but also to repay debts, make investments and even buy other buy other banks.

The report also blasted the Treasury Department for not providing taxpayers with more transparency and reiterated its call for the the department to require detailed reports about the use of TARP funds. From the report:

Treasury's reasons for refusing to adopt this recommendation have been squarely refuted by SIGTARP's audit results and are belied by Treasury own inclusion of use of funds provisions in its agreements with AIG, Bank of America and Citigroup. Further, the claim that the information provided by banks is "unreliable" is contradicted both by the threat of criminal penalty should a bank be untruthful to Treasury, and Treasury's reliance on self-reporting throughout its compliance regime. Imposition of a condition designed to foster basic transparency should not be used as a punitive measure required only of those institutions that are compelled to seek extraordinary assistance, but rather should be an integral feature of TARP as a whole.

 

A key part of the report which is expected to gain more attention in the next few days, is the number $23.7 trillion — that's how much Barofsky says government support of the financial system (beginning in 2007) could grow to. The number is cited as "total potential support related to crisis," meaning the money has not yet been spent or even committed. As for money that has been spent, over $440 billion in TARP funding had been spent as of June 30.