Bailout Overseer Reports Progress To Congress Neil Barofsky, special inspector general for the Troubled Asset Relief Program, is charged with making sure that bailout funds are being used properly. In a report to Congress released Tuesday, Barofsky urges the Treasury to join him in asking banks to account for their use of TARP funds.

Bailout Overseer Reports Progress To Congress

Bailout Overseer Reports Progress To Congress

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Last fall, the federal government stepped in to rescue the financial sector. The initial vision was a $700 billion bank bailout. But today, if both government and private funds are included, the Troubled Asset Relief Program, or TARP, is a $3 trillion effort — involving infusions for banks, financing for auto companies, assistance with home mortgages and more.

Neil Barofsky, special inspector general for TARP, is charged with keeping tabs on all that bailout money. Barofsky reports his findings and recommendations to Congress on Tuesday.

"Never in our country has so much money been pushed out by the federal government in such a short period of time," Barofsky tells NPR's Renee Montagne. "And whenever that happens, there are huge, huge opportunities for criminals to commit fraud. That's part of why we were created, was to try to cut off and ultimately investigate and make sure people who steal are prosecuted."

It's a big task, one that Barofsky so far has tackled with a small staff of approximately 35 employees. He says that the audit investigation division will eventually expand to 150 workers. But he also notes that his team is not alone and has partnered with the FBI and the Securities and Exchange Commission.

"We really have the weight of the entire United States federal government that we can work with to make sure to protect the taxpayer," Barofsky says.

The criminal investigations under way fall in the category of traditional white-collar crimes, such as securities fraud, insider trading and mail fraud, Barofsky says.

"Sadly, it's almost limitless the type of opportunities for fraud when you have $3 trillion going out the door," Barofsky says.

In his report to Congress, Barofsky reiterates his recommendation that the Treasury Department require TARP recipients to account for how funds are spent. The Treasury had argued that this tracking would be "impractical, impossible or a waste of time," according to the report.

The report says, "In light of the fact that the American taxpayer has been asked to fund this extraordinary effort to stabilize the financial system, it is not unreasonable that the public be told how those funds have been used by TARP recipients. Treasury is now conducting regular surveys of the banks' lending activities; however, with the exception of Citigroup and Bank of America, Treasury has refused to seek further details on TARP recipients' use of funds."

Barofsky says he undertook a request himself, sending out a letter in early February asking banks to report back how they were spending or planned to spend TARP money.

"We got a 100 percent response rate," Barofsky says. "Every single bank has replied to our survey. ... I think one thing that is very, very clear from our early response is it's not impossible, it's not impractical. A number of financial institutions put in controls right off the bat to make sure that they knew how they were using the TARP funds. Some of the information that we've gotten back is incredibly detailed information, and I think it's really going to be very helpful to Treasury, to Congress, to the American people to know what's going on with their investment."

He says he plans to put out a formal audit request in early June.

In response to the idea that some institutions may opt not to receive TARP assistance because of his accounting requests, Barofsky says that could be just one of many reasons why a bank may not participate; but either way, he is unfazed.

"I think to the extent that any financial institution is deciding not to seek TARP funds because we're asking them to account for how they're using that money — good. We're happy for that. We believe that any financial institution that for some reason is afraid to tell the American people how they're using this money, then we're better off without them."

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