WASHINGTON — The federal government overpaid for stocks and other assets in attempting to help financial institutions last year, a government watchdog said today, taking further issue with the beleaguered $700 billion rescue program.
Elizabeth Warren, chairwoman of the Congressional Oversight Panel for the bailout funds, told the Senate Banking Committee today that Treasury in 2008 paid $254 billion and received assets worth about $176 billion.
The figures were reached by extrapolating the results of a study of 10 government transactions, comparing the price paid by Treasury and the value of the asset at the time of purchase. Warren did not present details of the transactions the panel analyzed. A full report will be released Friday.
In a bright spot for the rescue program, however, banks that received capital infusions from Treasury already have paid $271 million in dividends to the federal government. A Treasury official said today that banks are expected to pay more than $1.5 billion in dividends by the end of this month. Among them is Wells Fargo, which received a $25 billion infusion. The bank announced this week it would pay Treasury $371 million in dividends.
Still, lawmakers and watchdog groups continued to express frustration with the implementation of the rescue plan, known as the Troubled Asset Relief Program. Congress approved the plan last fall, but members of both parties criticized spending decisions by the Bush administration and former Treasury Secretary Henry Paulson.
The misgivings come as new Treasury Secretary Timothy Geithner is preparing to place the Obama administration’s imprint on the program with a sweeping new framework for helping banks, loosening credit and helping reduce foreclosures. Geithner plans to unveil the changes next week.
“The plan will strengthen transparency and accountability measures so that taxpayers know where and how their money is being spent and whether it’s achieving real results,” Treasury spokesman Isaac Baker said.
Referring to overpayment on assets, Warren said Treasury has failed to specify its goals and methods in helping more than 300 institutions.
“There may be good policy reasons for overpaying, but without a clearly delineated reason we can’t know that,” Warren said.
Senate Banking Chairman Christopher Dodd, D-Conn., said the overpayment was sure to “raise eyebrows.”
“I can understand some gap,” he said. “No one is expecting perfection between the price you pay and what you think you’re getting. But that’s a pretty large disparity.”
Talk to us
> Give us your news tips.
> Send us a letter to the editor.
> More Herald contact information.
