GAO to Paulson: Get Your TARP in Order

The Government Accountability Office chided the Treasury Department yesterday for failing to address a number of key issues with respect to the Troubled Asset Relief Program (TARP). Chief among these in the congressional watchdog's 66-page report is the lack frameworks for (1) evaluating the impact of the government's direct investments in financial institutions and (2) monitoring limits on executive compensation and dividend payments.

It seems pretty reasonable to expect those things from the Treasury, given the extraordinary amounts of taxpayer funds at stake:

Company	Government Preferred-Share Investment
Citigroup (NYSE: C)	$45 billion
JPMorgan Chase (NYSE: JPM) Bank of America (NYSE: BAC) Wells Fargo (NYSE: WFC)	$25 billion each
Goldman Sachs Morgan Stanley (NYSE: MS)	$10 billion each
Bank of New York State Street (NYSE: STT)	$3 billion and $2 billion, respectively
Total (includes other institutions)	$250 billion

Source: U.S. Treasury, media reports.

The government has been taking some shortcuts in its efforts to stave off financial meltdown. In the instance of AIG (NYSE: AIG), for example, it voted shares that it acquired through its rescue ... in order to approve the rescue itself!

In a crisis, shortcuts may be necessary, but establishing a framework to evaluate the success of the program is no mere detail. It is a matter of the first priority. I hope and expect that the Treasury will address this promptly: As a former Goldman CEO, Treasury Secretary Hank Paulson isn't used to leaving things to chance, and his named successor, Tim Geithner, looks like a rigorous fellow. After all, any manager worth his salt knows: If you can't measure it, you can't manage it.

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