Fraud, Abuse In Govt. Bailout Program
APRIL 23, 2009
In its short existence the government’s $700 billion financial bailout has proven to be a troubling experiment of U.S. tax dollars that is rife with fraud, waste and abuse.
At least 20 criminal investigations have been launched into the controversial bailout and the risk is only going to grow, according to a scathing report released this week by the Treasury Department’s inspector general. Investigators reveal that they have launched criminal probes into securities fraud, tax law violations, mortgage modification fraud and insider trading involving recipients of the federal funds.
The Troubled Asset Relief Program (TARP) provided the Treasury Department with $700 billion to buy failing assets from financial institutions, supposedly to ease the credit crunch by allowing banks to clear their balance sheets and lend money. It also established a program to allow the government to insure, instead of purchase, troubled assets held by banks.
But the massive program has little oversight and is severely mismanaged, leaving it “inherently vulnerable to fraud, waste and abuse,” according to the inspector general’s assessment. It points out that TARP was designed to trust the Wall Street bailout recipients to act responsibly without accountability to the government.
As an example the report lists failing insurance giant American International Group (AIG). It was recently rescued by the government with taxpayer infusions totaling close to $200 billion yet has not been required to reveal what it is doing with the money.
The inspector general also denounces the Obama Administration’s plan to team up with hedge funds and other private capital groups to purchase banks’ so-called toxic holdings. That plan too carries significant fraud risks, the report says, further revealing that taxpayers are taking nearly all the risk in the government’s disastrous bailout plan.
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