The SIGTARP -- the Special Inspector General for the Troubled Asset Relief Program -- released a report [PDF] yesterday demonstrating that the Treasury Department could, if it so chooses, get a good deal more information out of the banks on how exactly TARP funds are being used. This Los Angeles Times article uses the report to peg a not-altogether convincing story on the administration's transparency -- can you believe that president and his staff have closed-door meetings with members of Congress? Yeah, me neither. Broken campaign promises aside, I can't imagine successful negotiations about anything taking place under that kind of public scrutiny.
Ironically, what's actually interesting about SIGTARP's report (incidentally, my new favorite acronym) is how banal it actually is. All the SIGTARP, Neil Barofsky, did was send a survey to banks and collect the results. Eighty-three percent said they used TARP funds to create new lending; none provided figures to verify their assertions. Treasury may not have tried to obtain this information because it's not particularly useful -- do you really trust the banks to self-report their TARP funding usage when they don't have to back up their positions with data? Treasury also says it has adopted a number of Barofsky's suggestions. But Barofsky's overall point is very important:
"You can't ask the basic questions or have a debate about the fundamental policy questions without information," Barofsky said in an interview.
That's the kind of transparency that really matters, I think: clear and appropriate metrics for policy programs that publicly match current data with performance benchmarks. Setting specific public goals before policy is implemented tends to be political suicide, but it's also the only way to actually manage anything effectively -- see this column. I'd really like to see Barofsky or Treasury get some serious, specific data on how TARP is affecting lending and stability -- the stress tests were as close as we've come, I think, and while they were a net benefit they also had some clear flaws. Maybe it's time for a stress check-up?
-- Tim Fernholz
