The inspector general's office carried out a survey of banks that had received Tarp funds - most said they had used them to expand lending, increase capital levels or buy mortgage-backed securities, it found. Given the high level of compliance - 98% responded to the survey - the inspector general argued that continuing to monitor banks' use of the Tarp funds would be practical.
"These responses demonstrate that banks can provide useful information to improve transparency over how they use TARP funds," the report, published today, said. In order "to meet the Treasury's stated goal of bringing transparency to the TARP program and informing the American people and their representatives in Congress on what is being done with their investment", the Treasury should order banks to report regularly on their use of the funds.
But so far, although the inspector general's office has recommended this before, the Treasury has not done so. The assistant secretary for financial stability, Herbert Allison, argued in a letter to the inspector general on July 15 that it was impossible for banks to trace Tarp money to specific loans or investments. "Even if Tarp investments could be traced to particular uses, those uses cannot be said to be attributable to the Tarp investment if the same expenditures would have been made from other sources...in the absence of Tarp funding," he wrote.
But, the inspector general's report responded, "For the Treasury to discount wholly [the survey's] results because a particular bank may not be able to say which dollar was used for a specific purpose substantially underestimates a bank's capacity - on a practical level - to know how its resources are being utilized."
Allison was missing the point, it continued. The fact banks had been able to reply to the survey showed they were able to link, through budgeting, Tarp funds with specific loans or capital buildups. "The fact that there may be some limitations on the precision of the data that could be collected by requiring use of funds reporting does not mean that such reporting could not generate meaningful information," the report added.