IF TAXPAYERS are spending billions to bail out banks, they deserve to know how that money is used. US Representative Barney Frank has introduced legislation that, among other things, would require institutions that take money from the $700 billion Troubled Assets Relief Program to report quarterly on what they do with it. The bill could come up for a vote in the House today, and it deserves to pass.
When Congress approved the program to thaw out a credit freeze last fall, the sense of crisis was so intense - and US Treasury officials' promises of transparency so insistent - that lawmakers placed few conditions on the money. The first $350 billion has now been committed. But are banks using it to make new loans? In a report to Congress last week, the bailout oversight panel headed by Harvard Law School professor Elizabeth Warren put the problem succinctly: "The Panel still does not know what the banks are doing with the money."
The Bush administration, at the request of President-elect Barack Obama, has asked Congress to authorize the release of the second $350 billion. Lawmakers shouldn't do so without imposing stricter conditions. For example, Frank wants at least $40 billion of the money to go to preventing foreclosures. Congress should direct the Treasury accordingly. Warren's report noted that lawmakers wanted the Treasury to "maximize assistance for homeowners." Such assistance slows down the plunge in home values and retards neighborhood blight.
Let's hope that Obama's team, of its own volition, will demand more accountability from bailout participants and pay more attention to the foreclosure epidemic. Even so, Congress should write clearer rules into law.