OCTOBER 14, 2010
In a perturbing example of abuse, the U.S. government has paid collapsed mortgage giants Fannie Mae and Freddie Mac $240 million to help administer its disastrous program to bail out the nation’s financial institutions.
There has already been ample documentation of the rampant corruption in the $700 billion Troubled Asset Relief Program (TARP), a disturbing experiment of U.S. tax dollars, but this seems to put the icing on the cake. Of the $436.7 million the Treasury Department has paid private firms to run TARP, more than half has gone to the scandal-plagued mortgage companies that were seized by the government in 2008.
The troubling information was made public this week by a Congressionally-created panel charged with overseeing the Treasury’s actions as well as the state of financial markets. In a lengthy report analyzing TARP contracts, the Congressional Oversight Panel (COP) determines that the Treasury’s extensive use of private contractors “creates significant concerns about transparency and potential conflicts of interest.”
In all, private businesses perform many of TARP’s “most critical functions” under 91 different contracts, the report says. Fannie Mae alone has a staff of 600 working on TARP, compared to just 220 Treasury employees. The Fannie and Freddie TARP agreements “raise significant concerns” because both “have a history of profound corporate mismanagement,” the COP found.
Last spring a Treasury Inspector General report revealed that TARP is rife with corruption, that dozens of criminal investigations have been launched and that the risk will only grow. So far probes have centered on securities fraud, tax law violations, mortgage modification fraud and insider trading involving recipients of the federal money.
When that report was published, the government had paid private companies and legal firms only $159 million to operate TARP. Details of those arrangements—including labor rates and how companies were selected to do the government work—have been kept secret by the Obama Administration, which has repeatedly violated its promise to provide Americans with unprecedented transparency.
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