While Barack Obama is making all the news headlines today for (finally!) doing some cheerleading for his recovery package (as it wends its way through Congress), I'd instead like to shine a light on something that appears to be getting lost in the media fray. Because, while it's admittedly more fun to cover politicians squabbling over stimulus details, we were just informed last week that the Treasury has apparently lost $78 billion of our tax dollars.
This is an outrage. To put this in perspective, this is more money than the annual budget for the Department of Transportation. It is more than we pay for the Department of Education. It is the size of the Departments of Justice, Energy, State, and the Interior -- combined. It is an amount bigger than the GDP of all but about 60 countries in the world. Even in Washington, this ain't pocket change, in other words. It's a lot of money. And it seems to have vanished.
If you don't know what I'm talking about, you are not alone. This story broke briefly last week, and then was swallowed up in all the other political coverage. The story sank with barely a ripple in the media.
From an AP article about this fiasco:
The Bush administration overpaid tens of billions of dollars for stocks and other assets in its massive bailout last year of Wall Street banks and financial institutions, a new study by a government watchdog says.
The Congressional Oversight Panel, in a report released Friday, said last year's overpayments amounted to a taxpayer-financed $78 billion subsidy of the firms.
The findings added to the frustrations of lawmakers already wary of the $700 billion 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.
Now, Paulson's not the only one to blame here. When the TARP money was authorized a few months ago, what the Bush administration asked for was $700, with no oversight and no accountability whatsoever, which they demanded by close-of-business the next day. Congress wrote a few weak provisions into the bill authorizing the money. One was that they could only spend half the money right away, and then had to get further congressional authorization for the remainder of it. Another was that Congress would set up an oversight panel. It took Congress months to even get this panel together, which was closing the barn door long after the horses had fled. So Congress bears its own share of the responsibility for this mess.
But Paulson and Bush's Treasury Department bear the brunt of the blame. Because what happened was that they paid over $200 billion for stocks that were worth a lot less -- on the day the stocks were bought (this isn't some apples-and-oranges comparison of prices now versus when the stock was bought, this is on the same day). A lot less. $78 billion less. Paulson, in essence, said to Wall Street "How about selling me some stock for a bunch of taxpayer money? I'll pay you a dollar for every 66 cents' worth of stock you sell me."
That's not an exaggeration. In some cases, it was even worse. AIG got $40 billion for less than $15 billion worth of stock -- meaning the taxpayers bought something for a dollar that was worth 37 cents.
This is not like the $9 billion that disappeared in the early stages of reconstructing Iraq. This was not cargo containers full of $100 bills that were handed out with no records being kept. This did not happen years ago.
This happened in the past few months. It was a transaction between the Treasury and Wall Street banks. There should be some paperwork on it, in other words.
To his credit, Dennis Kucinich has announced that his House subcommittee will be holding hearings to try to get to the bottom of exactly what has been done with our money so far, but the hearings won't happen until early March.
These hearings need to happen, at a minimum, before the second phase of the TARP money is released. Because there are a whole bunch of questions that I, as a taxpayer, want answered before handing out more money to Wall Street Banks. The first and foremost of these questions will be: What happened to our $78 billion?
Chris Weigant blogs at: ChrisWeigant.com