Following the money
The NYT describes the beginning role of the committee and chairman Elizabeth Warren to follow the money, in addition to GAO report.
…“You can’t just say, ‘Credit isn’t moving through the system,’ ” she said in her first public comments since being named to the panel. “You have to ask why.”
If the answer is that banks do not have money to lend, it would make sense to push capital into their hands, as the Treasury has been doing over the last two months, she continued. But if the answer is that their potential borrowers are getting less creditworthy with each passing day, “pouring money into banks isn’t going to fix that problem,” she said…
Like much of the public, lawmakers “have just been stunned by these economic and financial developments,” she said. “There wasn’t time even to develop a coherent list of questions to ask Treasury about what it’s doing and what it plans to do — and whether either of those are likely to address what’s going wrong.”
She added: “Our role is to make sure that the right questions are asked as early as possible.”
In that spirit, she promised that Congress would get the panel’s first report on Dec. 10, “laying out the central questions that Treasury should be addressing as it spends the taxpayers’ money.”
Meetings with Treasury officials so far have made her question whether they understand that “household financial health is profoundly tied to the economic health of the nation,” she said. “You cannot repair this economy if you can’t repair those families, and I’m not sure the people directing the bailout see that as their job.”
In her view, the government should be trying to create more reliable customers for those banks by shoring up the fragile finances of the millions of American families that could not save, borrow or spend even if their banks were flush with capital.
“Any effective policy has to start with the households,” she said. “Years of flat wages, low savings and high debt have left America’s households extremely vulnerable.”
Ms. Warren, on the law faculty at Harvard since 1995, has written extensively and testified frequently before Congress on consumer credit laws and personal bankruptcy reform. She has been a member of several government advisory panels addressing consumer finance issues, and is the co-author of “The Two-Income Trap: Why Middle-Class Mothers & Fathers Are Going Broke” (Basic Books, 2003).
Ms. Warren will also be responsible for getting the panel up and running quickly and steering it around the two other monitors put in place by the legislation, the Government Accountability Office, whose first report on the bailout is due Tuesday, and a special inspector general who is not yet on the job. (Neil M. Barofsky, a veteran federal prosecutor in Manhattan, has been nominated by the White House but is still awaiting Senate confirmation.)
The specific bailout investments, transactions and employment decisions need to be monitored closely to make sure they are appropriate and ethical, she said. “But we need to draw a distinction between policy oversight and procedural oversight,” she added. “I see our role as lying more in the policy realm, so I don’t think we duplicate those efforts.”
The panel is also required by law to provide Congress with recommendations for reforms to the financial regulatory structure, a report that she said it would deliver by Jan. 20.
Despite Ms. Warren’s ambitious timetable, the new Congressional panel is having a bumpy start.
Created with the law’s passage on Oct. 3, it existed only in theory until Nov. 14, when its first three members were appointed by the Democratic leadership in Congress. Besides Ms. Warren, they are Damon Silvers, an associate general counsel of the AFL-CIO and the panel’s new deputy chairman, and Richard H. Neiman, the state superintendent of banks for New York.