Judging the performance of the federal bailout program for banks is tough to do when government officials rely on private contractors—that aren’t subject to public scrutiny—to do the actual work.

 

That’s the case with the Department of the Treasury’s Troubled Asset Relief Program (TARP), which handed out 96 contracts worth $436.7 million. These contractors are conducting “substantial portions” of TARP’s duties, and as a result are shielding the program from congressional oversight.

 

The largest TARP contracts have gone to law firms, investment management firms, and audit firms, which often have significant conflict of interest problems. One example cited by the Congressional Oversight Panel (COP) was the law firm Cadwalader, which is working for TARP while at the same time representing several TARP recipients.

 

In another case, the Treasury Department issued a small business contract to a “disadvantaged business,” which in turn gave about 80% of the contract to a large business. Thus, according to the COP report, “although on the surface it appears that the contract is being performed by a small business, in actuality a large business is essentially responsible for performance.”

 

The Congressional Oversight Panel also was not happy that the Treasury Department is using Fannie Mae and Freddie Mac to help with TARP, given that both mortgage giants “have a history of profound corporate mismanagement.”

-Noel Brinkerhoff, David Wallechinsky

 

Watchdog Finds Treasury’s Reliance on Contractors Shielded Bailout Work from Scrutiny (by Marian Wang, ProPublica)

Examining Treasury’s Use of Financial Crisis Contracting Authority (Congressional Oversight Panel) (pdf)