How Will The $700B Be Distributed? An oversight panel appointed by Congress is urging the Treasury Department to be clearer about how it's handling the financial rescue package. We explore how the money is being distributed.
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How Will The $700B Be Distributed?

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How Will The $700B Be Distributed?

How Will The $700B Be Distributed?

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From the studios of NPR West, this is Day to Day. I'm Alex Cohen.


And I'm Madeleine Brand. Coming up on the program, what the corruption allegations against Illinois Governor Rod Blagojevich mean for Barack Obama's vacant Senate seat.

COHEN: First though, what exactly is happening to that $700 billion that's supposed to get us out of this current financial mess? Congress is looking into the Treasury Department's management of the Troubled Asset Relief Program, or TARP.

BRAND: And lawmakers want to know why banks aren't lending more even though they've received billions of dollars of taxpayer money. And there are questions also about internal controls and about accountability.

COHEN: Today, the House Financial Services Committee is questioning Assistant Treasury Secretary Neel Kashkari. And here with us now to tell us what's going on there is NPR's Yuki Noguchi. So, Yuki, what exactly is this hearing about?

YUKI NOGUCHI: Well, it's designed to look at how the government is managing all this money it got a couple of months ago. But what these hearings have become are venues for lawmakers to vent their frustrations, essentially.

The plan for this money is always changing, and more importantly, little of it seems to be reaching the consumers. So, foreclosure rates are still rising, and credit remains tight on things like car and student loans. And here's Republican Congressman Scott Garrett from New Jersey.

Representative SCOTT GARRETT (Republican, New Jersey): It was my understanding, and I thought it was your understanding, Mr. Chairman, that the TARP was supposed to be one of the main solutions. But so far, that has not come to fruition for the average American.

COHEN: Congressman Garrett isn't the only one who's been critical. There was a recent report from the General Accountability Office that also criticized the Treasury. Is that report similar? Are there any differences here?

NOGUCHI: Yeah, it's very similar. That report said Treasury keeps changing course without really explaining those changes, and it also said there's no real benchmarks for success. So, that report came up again and again today.

COHEN: So, what's Treasury's response been?

NOGUCHI: Well, as you mentioned, Neel Kashkari is the guy who's basically running the program for Treasury, and his statement says, essentially, Treasury is abiding by some clear goals, but that fixing the economy requires a lot of different approaches. I should also say that Congress actually recently appointed an oversight panel to monitor the TARP program, and they begin their hearings next week.

COHEN: In Las Vegas, we should note, too, which I thought was rather interesting. Now, Yuki, Congress was the body that gave the Treasury the $700 billion to begin with, right?

NOGUCHI: Yeah. In fact, the chair of the committee hosting this hearing is Barney Frank of Massachusetts. He basically all but begged fellow Democrats to support it. And now, he's sort of in the weird position of defending his support.

Representative BARNEY FRANK (Democrat, Massachusetts): So, the question is not whether we should or shouldn't have done that in my mind, but having done it, could it have been executed better? I believe it can.

NOGUCHI: Well, as you can imagine, that support is pretty much eroded. Here's a clip from California Congresswoman Maxine Waters. She's telling Barney Frank here she pretty much regrets giving Treasury so much flexibility to spend this money as they saw fit.

Representative MAXINE WATERS (Democrat, California): You've been too kind. You've been too good, and you have allowed them to walk all over us. It doesn't feel good. These footprints on my back are just too tough.

COHEN: Yuki, you mentioned earlier the frustration that Treasury never followed the original plan to buy up the toxic assets. What else are the concerns here?

NOGUCHI: Treasury invested half of that money instead into banks, hoping that would spur more lending, and now, about $300 billion later, credit still hasn't been flowing very freely. And meanwhile, there also hasn't been a lot of help for homeowners.

And as you probably know, there are several programs that are supposed to modify home loans so people can keep making their mortgage payments. Well, you know, by all accounts, that's really not happening enough or in enough volume anyway to make a difference. So, it just kind of all looks bad, all this spending and seemingly to no real effect.

COHEN: So, we're coming up on a new administration, and in January, Assistant Treasury Secretary Neel Kashkari is expected to leave. So, what next?

NOGUCHI: Well, that's a good question. I mean, it seems that President-elect Obama's team is more willing to spend some of the rescue funds to modify these home loans, and Sheila Bair, the Federal Deposit Insurance Corporation chairman, recently laid out such a plan. And her plan calls for using $24 billion to basically provide partial government guarantees if the reworked mortgages didn't work out. This is something that the Bush administration has said it is not supporting because this is not what the money was intended for. So, it's been a kind of stalemate.

COHEN: NPR's Yuki Noguchi, thank you.

NOGUCHI: Thank you.

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