The $700bn bail-out of the US banking system is being carried out without adequate oversight, according to the Government Accountability Office (GAO).
The Congressional watchdog says that the US Treasury is failing to monitor whether banks have complied with requirements on executive pay.
And it says the US Treasury failed to address "critical issues" when it changed the goals of the rescue plan.
Congress approved the controversial bail-out package in early October.
At that time, US Treasury Secretary Henry Paulson said that the $700bn would be used to buy up troubled mortgage assets from the banks.
But shortly afterwards, he decided that the money would be better spent by providing additional capital directly to the banks.
So far, over $150bn has been invested by government in the purchase of preferred shares, including taking a $115bn stake in eight major national banks, and smaller stakes in 44 other banks.
The Treasury's said its objective was to stabilise the financial system and increase the flow of funds for lending.
But the GAO report says that the Treasury "has no policies or procedures in place for ensuring the institutions... are using the capital investments in a manner that helps meet the purposes of the act."
The GAO pointed out that the major banks had told them that the government investment would not be viewed any differently from other capital, and used to "strengthen their capital base, make acquisitions, and lend to individuals and businesses."
And it questions whether the Treasury has even been able to monitor the actions of the banks.
It also points out that no bank had been refused access to funds.
"The rapid pace of implementation and evolving nature of the programme have hampered efforts to put a comprehensive system of internal control in place," the GAO report said.
But Neel Kashkari, the head of the Treasury bail-out programme, said there was no need to monitor how individual banks were spending the funds and added that "the Treasury has made significant efforts to ensure transparency and good communication."
No comments:
Post a Comment