WASHINGTON. D.C. – House Committee on Oversight and Government Reform Ranking Member Darrell Issa (R-CA) today characterized a report released by the Congressional Oversight Panel entitled, “Assessing Treasury’s Strategy: Six Months of TARP” as a wake-up call for the Administration to immediately institute means to properly and accurately value toxic-assets.

“This diagnosis of the financial crisis is driving the Administration’s aggressive interagency effort to revive credit markets and strengthen the balance sheets of financial institutions through capital injections and the removal of toxic assets,” the report reads.  “Yet this approach assumes that the decline in asset values and the accompanying drop in net wealth across the country are in large part the products of temporary liquidity discounts due to nonfunctioning markets for these assets and, thus, are reversible once market confidence is restored.”

“Assumptions that the Treasury Department has made regarding the depth and severity of the financial crisis have called into question the direction they have chartered in their attempts to address the financial crisis,” Issa said.  “After two administrations and six months, we are still meeting resistance from the Administration on implementing a common platform that would allow us to track TARP dollars and value toxic assets – something this report characterizes as crucial to the success of our efforts to address the current economic crisis.”

At a hearing last month of the Oversight and Government Reform Committee, Rep. Issa pointed to a common reporting format such as XBRL (Extensible Business Reporting Language) to greatly improve transparency.  XBRL is in place as a reporting standard in approximately 40 countries around the world, including China.  Banks are currently required to disclose information to the FDIC in XBRL format, and the SEC recently approved a final rule mandating the use of XBRL for all public companies reporting, with some companies required to comply starting in June of 2009.

“As this report notes, transparency is one of the historical precedents that determine the successful resolution of a financial crisis,” Issa noted.  “We have the means available to show the taxpayers how their money is being used, while providing measurable results—namely, determining whether the money achieved what it was intended to achieve.”

The report also characterizes the Treasury Department’s decision to limit the number of fund managers for the PPIP, and the eligibility criteria for fund managers as “open issues that need to be addressed in-depth in future Panel reports.”

Rep. Issa sent a letter yesterday to Treasury Secretary Timothy Geithner and National Economic Council Director Lawrence Summers regarding the framework established by the Administration for the Public Private Investment Program (PPIP).

“I was troubled to learn that the PPIP designates a select few ‘fund managers’ and restricts participation in the plan to an elite group of industry titans,” Issa says in the letter.  “I am puzzled that given the goal to ‘maximize the inflow of private capital into the market in an expeditious manner’ and create a liquid market for the toxic assets, you would so drastically limit the number of potential participants in the program.”

The guidelines for participation established by the Administration significantly restrict and limit the number of potential participants in the program.  Only a few select firms such as BlackRock, Pimco, Goldman Sachs, Legg Mason, and Bridgewater would meet the requirements to participate in the effort to purchase toxic-assets.

“This elite circle of people influencing the Administration’s economic policies and plans includes Laurence Fink, the chairman and CEO of BlackRock, who hopes to play a potentially lucrative role in the administration’s bank rescue plan,” Issa says.  “Treasury’s plan anoints a select group of fund managers to make significant profits. Reports indicating that at least one of the potential beneficiaries of the plan consults directly with the White House on economic policy matters, raises serious questions about the Administration’s decision making process in developing the plan.  I am troubled by the lack of transparency in the PPIP development and decision making process.”

Rep. Issa asks the Administration to provide the Oversight and Government Reform Committee the following information by close of business on Monday, April 20, 2009:

1. A full and complete explanation of why the PPIP restricts applications to firms that already have a minimum of $10 billion in toxic assets under management given the goal of the plan to “maximize the inflow of private capital into the market in an expeditious manner.”

2. All records of communications you or Treasury staff has had referring or relating to the development of the PPIP with any representative of the following companies: BlackRock, Pimco, Goldman Sachs, Legg Mason, and Bridgewater.

3. The names of all outside advisors from the business and/or finance community that you consult with for advice on policy matters.

4. All records of any decision to recuse yourself from participation in any discussion related to the PPIP due to a conflict of interest.

5. Any and all predecisional records of communications referring or relating to the PPIP, including but not limited to any drafts, comments, notes, or memoranda.

Click here for the letter to Geithner

Click here for the letter to Summers