MELISSA BLOCK, host:
From NPR News, this is All Things Considered. I'm Melissa Block.
MICHELE NORRIS, host:
And I'm Michele Norris. The controversial TARP financial rescue plan took a few more knocks today and appears headed for some serious reworking. Incoming Obama administration officials and House Democrats say they intend to change the $700 billion program. As NPR's John Ydstie reports, they want to provide more help for struggling homeowners and more accountability for how the rest of the money - about $350 billion - is spent.
JOHN YDSTIE: Criticisms of the huge financial rescue package flared within weeks of its passage last fall. First, Treasury Secretary Henry Paulson changed the focus of the program away from buying up toxic mortgage-backed securities in favor of injecting hundreds of billions of dollars of capital into the nation's banks. Some lawmakers called it a bait-and-switch and also complained that no TARP funds were being used to help homeowners avoid foreclosures. Today, a TARP Oversight Panel released its first substantial report on the rescue program. It, too, was critical. Harvard law Professor Elizabeth Warren, the panel's chair, said that among other things, the panel was concerned that Treasury had no systems in place to see if banks were actually using the government's money to make new loans.
Professor ELIZABETH WARREN (Bankruptcy and Commercial Law, Harvard Law School): It's not a claim the money has been used wrong; it's a claim that the money is not being accounted for properly. And look, if you're going to use American taxpayer money, American taxpayers have a right to know how you're using it and why you're using it that way. That's all you're asking for. You can't evaluate if you can't see what's happening.
YDSTIE: Warren's panel was also highly critical of the Bush administration's decision not to use the TARP money to help homeowners avoid foreclosures.
Prof. WARREN: These are huge numbers, and we have to remember, it's not only the families that go into foreclosures. It's their neighbors; it's their communities; it's everybody in the construction industry. The echo effect of having that kind of foreclosure rate is just staggering for the whole economy.
YDSTIE: Even as Warren was making those criticisms on CNN, on Capitol Hill, Massachusetts Democrat Barney Frank was announcing a new bill to revise and strengthen the TARP.
Representative BARNEY FRANK (Democrat, Massachusetts): I mean, a lot of what we're talking about is making them do, or having them agree to do, what was in the original bill.
YDSTIE: Frank echoed the two main criticisms of Treasury Secretary Paulson's stewardship of the TARP.
Rep. FRANK: First of all, the refusal - inexplicable to me - to use any of the money for foreclosure only when it was explicitly mandated; secondly, he dispersed the money in the capital program, I think, with good purpose, but without safeguards as to what they would do with it. So, yeah, I share those criticisms.
YDSTIE: The bill Frank is proposing would require greater accountability on both those matters, mandating, for instance, that some of the remaining bailout money be used to help prevent foreclosures. Frank's bill would also retroactively put limits on compensation for executives of financial institutions who have already accepted TARP funds.
Rep. FRANK: It is setting some rules about what is and isn't appropriate. I don't regard the denial of a bonus to someone who is making millions of dollars and whose institution is benefiting from taxpayer funding as a punishment. If they don't like it, they can give the money back.
YDSTIE: For his part, Secretary Paulson said in an appearance earlier this week that he has no regrets about the actions he's taken.
(Soundbite of press conference)
Secretary HENRY PAULSON (U.S. Department of the Treasury, George W. Bush Administration): As I look at the major issues, the issues where we intervened, going to Congress to get the authorities for the TARP, I believe we made the right decisions.
YDSTIE: Congressman Frank said his bill to revise TARP would be voted on by the middle of next week. He said he has been working with members of the Obama team, including Treasury Secretary-designate Tim Geithner, on ways to strengthen the financial rescue program. A transition official told Reuters today that Geithner is developing a comprehensive set of principles for the TARP. The officials said they will include measures to address foreclosures and place tougher conditions on financial institutions that receive money, including limits on executive compensation. John Ydstie, NPR News, Washington.