Congress had approved the $700 billion program in 2008, after the then Secretary of Treasury Henry Paulson said it would be used to buy broken bonds and clean off banks' balance sheets. Shortly after the Congressional approval, Mr. Paulson changed the focus to buying preferred shares in banks in late 2008.
According to the testimony, despite the assurances of then-Secretary Henry Paulson, who said that the transactions were at par... The valuation study concludes that Treasury paid substantially more for the assets it purchased under the Troubled Asset Relief Program (TARP) than their then-current market value," Harvard Law School professor Elizabeth Warren told the U.S. Senate Banking Committee on Feb. 5, Thursday.
On Feb.5, 2009, Harvard law professor, Elizabeth Warren testified in Congress that her group estimated the Treasury paid $254 billion in 2008 in return for stocks and warrants worth about $176 billion under the Troubled Asset Relief Program (TARP).
The U.S. Department of Treasury under the direction of then Secretary Paulson had overpaid financial institutions to the tune of $78 billion in carrying out capital injections last year, 2008. The head of a congressional oversight panel for the government's $700 billion bail-out program told Congress on Feb.5, Thursday.
"Treasury simply did not do what it said it was doing ... They described the program one way, and they priced it another," Ms. Warren said at a hearing before the Senate Banking Committee. She added that Mr. Paulson "was not entirely candid" in describing TARP's bank capital injection program.
On Feb.5, 2009, Harvard law professor, Elizabeth Warren testified in Congress that her group estimated the Treasury paid $254 billion in 2008 in return for stocks and warrants worth about $176 billion under the Troubled Asset Relief Program (TARP).
The U.S. Department of Treasury under the direction of then Secretary Paulson had overpaid financial institutions to the tune of $78 billion in carrying out capital injections last year, 2008. The head of a congressional oversight panel for the government's $700 billion bail-out program told Congress on Feb.5, Thursday.
"Treasury simply did not do what it said it was doing ... They described the program one way, and they priced it another," Ms. Warren said at a hearing before the Senate Banking Committee. She added that Mr. Paulson "was not entirely candid" in describing TARP's bank capital injection program.
When extrapolating the data, it shows the capital injections made by Treasury in 2008 suggests that the government received $176 billion in preferred stock and warrants for investments totaling $254 billion, a shortfall of $78 billion.
An analysis of the testimony indicated that the ten largest TARP investments made by Treasury in 2008, not including investments in the U.S. auto industry, found that for ever $100 spent, they received preferred stock and warrants worth approximately $66.
In other words, the United States government will be receiving $.66 in return for each dollar given to these investment banks and companies in 2008.
On a 'brighter' note, according to the Washington Post on Feb.5, the panel's findings do not necessarily suggest that the government has truly lost $78 billion, but that these banks are still required to repay the amount invested by the government plus interest.
The caveat of this interpretation is that since the actual market value is much lower, it is entirely possible that these banks or companies will end up defaulting on their obligations to the government, or rather the taxpayers.
In other words, the United States government will be receiving $.66 in return for each dollar given to these investment banks and companies in 2008.
On a 'brighter' note, according to the Washington Post on Feb.5, the panel's findings do not necessarily suggest that the government has truly lost $78 billion, but that these banks are still required to repay the amount invested by the government plus interest.
The caveat of this interpretation is that since the actual market value is much lower, it is entirely possible that these banks or companies will end up defaulting on their obligations to the government, or rather the taxpayers.
The panel's findings do not imply that the government has lost money on the investment because companies are still required to repay the amount invested plus interest. The lower market value determined by the panel reflects the risk that companies will default on those obligations. The panel found that a private investor would have charged significantly more to invest the same amount in the companies because of the greater risk and that the government did not charge this premium.
United States Senate Banking Chairman Christopher Dodd, (D-Conn.),Senator Sherrod Brown (D-OH), and other members of the Senate Banking Committee were not at all pleased with the news nor were they pleased with the ensuing testimony by Mr. Neil Barofsky, the Office of the Special Inspector General, appointed by President George W. Bush.
United States Senate Banking Chairman Christopher Dodd, (D-Conn.),Senator Sherrod Brown (D-OH), and other members of the Senate Banking Committee were not at all pleased with the news nor were they pleased with the ensuing testimony by Mr. Neil Barofsky, the Office of the Special Inspector General, appointed by President George W. Bush.
For viewing from the U.S. Senate Banking video archive here.
On the same day, the United States Senate Committee on Finance also heard another troubling testimony from Mr. Neil Barofsky, the Office of the Special Inspector General, a watchdog group to oversee the TARP program has released its findings on Feb. 6.
On the same day, the United States Senate Committee on Finance also heard another troubling testimony from Mr. Neil Barofsky, the Office of the Special Inspector General, a watchdog group to oversee the TARP program has released its findings on Feb. 6.
The full text of SIGTARP is available for readers to read.
This writer suggests that readers might focus on Sections 1 to 3; and Section 4 provides recommendations to Treasury, going forward in 2009.
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