Last October, in the early stages of a mad scramble to rescue the American economy from a financial heart attack, Congress gave the Treasury Department $750 billion to buy toxic securities from banks. From that not-so-paltry beginning, the rescue effort has evolved into 12 separate programs that cover up to $3 trillion in direct spending, loans and loan guarantees. The potential for waste, fraud and abuse is enormous, the man assigned to protect those trillions doesn't like what he sees, and we are glad he's on the job.
Last week, Neil M. Barofsky, the special inspector general overseeing the Troubled Asset Relief Program, said he has already opened 20 criminal investigations and six audits into whether tax dollars are being pilfered or wasted. He noted those actions in a 250-page report detailing a list of concerns about the government's efforts to prop up hundreds of banks, Wall Street firms and auto companies.
Mr. Barofsky has sent several recommendations to Treasury Secretary Timothy F. Geithner and others charged with implementing the bailout, and they would be well advised to follow his advice.
The reason: bailout rage. The public outcry over massive government spending to support "too big to fail" corporations is growing, and the Treasury Department is under increasing pressure to protect tax dollars even as it attempts to repair the financial markets.
Among Mr. Barofsky's proposals: Require all TARP recipients to detail how they use bailout dollars and safeguard a new mortgage rescue effort against scams. The inspector general has legal firepower. He can use subpoenas to compel disclosure and is required by federal law to track the details of how banks are spending taxpayer dollars. His report did not detail the 20 criminal investigations, which include securities fraud, tax, insider trading and public corruption matters.
Mr. Barofsky has a sharp eye for potential frauds that may hurt ordinary citizens and cheat the government. He fears a pending mortgage rescue program may draw a wave of real estate fraud artists and has suggested that officials take steps to confirm the identities of participants and alert homeowners that they aren't required to pay fees to take part. But his most important goal should be to satisfy taxpayers that TARP doesn't turn into a fiscal black hole, with little or no disclosure of how and why hundreds of billions in public money have disappeared.
To that end, Mr. Geithner should follow his recommendations or give good reasons why he won't. And Mr. Barofsky should be relentless in prosecuting thieves in executive suites or elsewhere caught plundering any piece of the trillions at stake.