Frank Seeks More Oversight of Paulson
House Financial Services Committee Chairman Barney Frank sought authority to oversee and audit Treasury Secretary Henry Paulson's $700 billion program to buy bad mortgage investments.
Frank, a Democrat from Massachusetts, proposed that the U.S. Comptroller General “commence ongoing oversight of the activities and performance'' of the plan, according to legislative language presented to Treasury officials today and obtained by Bloomberg News.
The Comptroller General, who serves as director of the Government Accountability Office, and other GAO officials would have access to financial records, have audit powers and would report findings to Congress, under Frank's measures. The GAO is Congress' financial watchdog.
Frank also recommended limits on executive compensation of companies participating in the debt purchase plan, called the Troubled Asset Relief Program, or “TARP.'' Frank's additions to Paulson's request yesterday urged the Treasury to broaden efforts to help homeowners in danger of foreclosure.
The Comptroller General's oversight will include assessing how well the program is meeting other goals Frank set out, including foreclosure prevention, consumer protection and stabilization of the financial system, according to the document.
Unchecked Power
Paulson asked Congress for unfettered authority to buy devalued mortgage-related securities from investment firms in an effort to keep the financial system from coming to a standstill. The proposal would prevent courts from reviewing the Treasury's actions while raising the nation's debt ceiling.
“We cannot just turn over $700 billion in taxpayer money and not insist that that taxpayer is going to be protected in this,'' Senate Banking Committee Chairman Christopher Dodd told reporters today after a conference call with Senate Democratic leaders creditscore.
The comptroller will submit reports of findings at least every 60 days to the House Financial Services Committee, the Senate Banking Committee and the Treasury Department Inspector General on the activities and performance of the program, according to the draft language.
The program will issue audited financial statements annually to the public and Congress, and the GAO will audit the statements.
CEO Compensation
Companies seeking to sell assets through the program must meet “appropriate standards'' for executive pay and shareholder disclosure, Frank proposed. These include limits on pay to exclude incentives for executives to take risks that are “inappropriate or excessive.''
The Treasury facility would be required to help homeowners avert foreclosures on mortgages, mortgage-backed securities and other assets it acquires that are secured by residential real estate. This includes using its authority as an investor to urge the companies that service the underlying loans to take advantage of a new Federal Housing Administration program.
The FHA program, created under a foreclosure-prevention law Congress enacted in July, is aimed at insuring up to $300 billion in refinanced 30-year fixed-rate loans for about 400,000 borrowers after loan holders agree to forgive some of the balance to help struggling homeowners.