WASHINGTON — Government officials overseeing a $700 billion bailout have acknowledged difficulties tracking the money and assessing the program’s effectiveness.
The information was contained in a document, released Wednesday, of a Dec. 10 meeting of the Financial Stability Oversight Board. The panel, headed by Federal Reserve Chairman Ben Bernanke, includes Treasury Secretary Henry Paulson and Securities and Exchange Commission chief Christopher Cox.
While offering no details, the document also mentioned that officials at that meeting discussed “potential methods” of using the bailout program to help curb home foreclosures and ease problems in the housing market.
More broadly, the officials discussed “the difficulty of isolating the effects” of the bailout program “given the variety of policy actions taken by the U.S. government to support financial stability and promote economic growth.”
The officials also noted the “difficulties associated with monitoring the use of specific funds” provided to individual financial institutions, according to the document.
The bailout program, created Oct. 3, was designed to break through a debilitating credit clog and spur financial markets to operate more normally again. Credit and financial woes — along with a severe housing crisis — have plunged the economy into a painful recession.
Separately, Treasury said Wednesday it will decide on a case-by-case basis whether other companies connected to the struggling automotive industry should be provided emergency aid from the bailout pool.
President George W. Bush reversed course on Dec. 19 and announced a $17.4 billion rescue package for teetering auto giants, General Motors Corp. and Chrysler LLC, which were burning through cash and bleeding jobs.
The government earlier this week provided $5 billion in aid to GMAC Financial Services, GM’s troubled financing arm, and said it would lend GM up to $1 billion.
In deciding whether to aid others, the department said it will consider “the importance of the institution to production by, or financing of, the American automotive industry,” and whether a major disruption of the companies’ operations would likely hurt employment and the national economy.
In another report responding to questions from the top congressional watchdog overseeing the bailout, the Treasury Department defended its management of the program amid criticisms about confusing shifts in strategy.
Paulson’s decision to focus the program on providing banks and other companies with capital injections — rather than the original strategy of buying rotten assets from banks— was necessary to respond to quickly changing financial market conditions, according to the new Treasury report.
Harvard law professor Elizabeth Warren, the chairwoman of a congressional oversight panel, has said she didn’t understand why it’s taken so long for the Bush administration to explain its plan. The five-member panel — made up of three Democratic appointees, including Warren, and two Republicans — has criticized Treasury for not saying exactly what problems they’re trying to fix or how the investments will fix them.
The department insists the program is helping to stabilize the financial system, but acknowledges it will take time for conditions to return to normal.
“We have made significant progress, but there is no single action the federal government can take to end the financial market turmoil and the economic downturn,” the report said. “We are confident we are pursuing the right strategy.”