It’s been only a few days since Congress approved and the president signed into law the $700 billion financial-markets bailout bill, and House Speaker Nancy Pelosi, D-San Francisco, already is voicing concern that the Treasury Department might not be living up to the bill’s standards.
“The new law provides the Treasury Secretary discretion to decide how to address conflicts of interest through guidelines, regulations, or by prohibiting them altogether,” Pelosi wrote to Treasury Secretary Henry Paulson yesterday. “As I have reviewed the interim guidelines issued by Treasury yesterday, and those in Treasury’s solicitation for asset management and other portfolio management services, I am very concerned that they fail to meet the tough conflict of interest standard directed by Congress in the legislation.”
Read her whole letter, after the jump…
October 7, 2008
Secretary Henry Paulson
Department of the Treasury
1500 Pennsylvania Ave., NW
Washington, D.C. 20220
Dear Secretary Paulson:
All Americans are hopeful that the recently enacted Emergency Economic Stabilization Act will be successful in instilling confidence in our financial markets. The original proposal which you submitted to Congress in mid-September did not contain essential provisions to ensure appropriate independent oversight, judicial or administrative review, or adequate safeguards to avoid conflicts of interest. As you are aware, Congress added several provisions to this legislation to significantly increase independent oversight, accountability, and transparency. In particular, Congress voted overwhelmingly to include provisions to avoid or minimize conflicts of interest.
The new law provides the Treasury Secretary discretion to decide how to address conflicts of interest through guidelines, regulations, or by prohibiting them altogether. As I have reviewed the interim guidelines issued by Treasury yesterday, and those in Treasury’s solicitation for asset management and other portfolio management services, I am very concerned that they fail to meet the tough conflict of interest standard directed by Congress in the legislation.
Under these guidelines, companies that benefit from the Troubled Assets Relief Program (TARP) may also be eligible to offer asset management or other contractor services if Treasury personnel approve a mitigation plan. These guidelines would appear to permit financial institutions with a clear conflict of interest to participate in the management of the TARP, a situation that provides insufficient protection to taxpayers. Given the significance of the TARP for the recovery of our financial markets, the American public must have complete confidence that those managing the program are doing so entirely for the benefit of the public and not to benefit their own self-interests.
We all need to assure the American people of our commitment to meaningful oversight and to protecting the interests of taxpayers. I therefore urge you to reconsider your interim guidelines and to strengthen them to avoid even the appearance of conflicts of interest by the same financial institutions who may also benefit from the TARP.
Speaker of the House