WASHINGTON - The top congressional watchdog overseeing the nation's financial bailout said yesterday that she's frustrated by the Treasury Department's refusal to explain how it is doling out billions in taxpayer money.
Harvard law professor Elizabeth Warren, chairwoman of a congressional oversight panel, traveled to Washington to get answers on how Treasury is managing the unprecedented bailout.
In an interview, the Democratic appointee said she doesn't understand why it's taken so long for the Bush administration to explain its plan. Warren said she doesn't want to believe it's because there never was a plan for spending $700 billion in taxpayer money to rescue banks.
"I don't buy a winter coat without a plan," she said. "I can't imagine how someone could think they were going to repair a failing economy and undertake spending billions of dollars in taxpayer money without a plan."
Treasury Secretary Henry Paulson originally intended to use the money to buy risky loans from banks, freeing them to make new, safer loans. Shortly after the funds were approved, however, Paulson announced that $250 billion would instead be used to buy stock in U.S. banks.
"We've reversed directions more than once here, without any description of an overall strategy," Warren said. "It's not to say there's not one, but I don't think it should be such a well-hidden secret."
Treasury spokeswoman Brookly Mclaughlin had no comment on Warren's remarks. Treasury officials have said they are working toward several objectives, including stabilizing the financial markets, supporting the housing market and protecting taxpayers.
Nevertheless, the bailout has drawn criticisms from Republicans who oppose the huge new government program and from Democrats who want some of the money to be used to rework mortgages so homeowners can keep their houses.
The congressional oversight panel criticized Treasury last week for not saying exactly what problems they're trying to fix or how the investments will fix them.
While Warren placed the blame squarely on Treasury for not laying out a clearer plan, she tempered any criticism of Congress, which put few restrictions on the money as it hurriedly passed a law giving Treasury historic power to make multibillion-dollar decisions. Such requirements were omitted, she said, because the Bush administration pressured Congress to approve the bill quickly.
Paulson "was telling the Congress of the United States, 'Do this right now,"' she said.
The five-member oversight panel is made up of three Democratic appointees and two Republicans. Senate Republican leader Mitch McConnell of Kentucky named outgoing Sen. John Sununu of New Hampshire to the panel on Tuesday. Sununu has echoed Warren's comments that taxpayers deserve to know how the money is being spent.
The panel is one of several entities monitoring the bailout, in addition to a special inspector general and the Government Accountability Office.
The GAO said in a critical report earlier this month that Treasury should toughen its monitoring of the bailout fund to ensure that banking institutions limit their top executives' pay and comply with other restrictions. *