WASHINGTON — The Congressional Oversight Panel is due to release a report as early as today that sharply criticizes the Treasury Department's implementation of the Troubled Asset Relief Program.

The 49-page report, a draft of which was obtained by American Banker, said the Treasury has defied the intent of Congress in creating Tarp, failed to answer basic questions about the program, and provided little evidence that it has worked effectively.

The panel cites the Treasury's refusal to use Tarp to mitigate foreclosures — a requirement of the Oct. 3 law that created the $700 billion program. Though the Treasury argued in a letter to the panel that its overall strategy has helped reduce foreclosures, the board said the explanation lacked specifics.

"For Treasury to take no steps to use any of this money to alleviate the foreclosure crisis raises questions about whether Treasury has complied with Congress's intent that Treasury develop a 'plan that seeks to maximize assistance for homeowners,' " the report says.

The report will be the second from the board, which is chaired by Prof. Elizabeth Warren of Harvard Law School. The first, released Dec. 17, asked Treasury to respond to 10 questions about the program. The second report says the Treasury's response was lacking in many respects. "It did not provide complete answers to several of the questions and did not address some of the questions at all. The panel is concerned that Treasury's initial response to our questions is not comprehensive."

For example, in response to a question asking the Treasury to describe its strategy in administering Tarp, the department offered a list of initiatives that had nothing to do with Tarp funds, according to the report.

The board also cited the lack of transparency in Tarp and the Treasury's refusal to require banks to show if they are using capital infusions from the program to lend.

"So long as investors and customers are uncertain about how taxpayer funds are being used, they question both the health and the sound management of all financial institutions," the report says. "The recent refusal of certain financial institutions to admit to any responsibility to account for how they are using taxpayer money undermines public confidence."

The report also dismissed the Treasury's claims that Tarp is working effectively. In its response to the board, the Treasury said capital injections and other Tarp programs have stemmed a series of failures and made the financial system more stable. It cited the average credit default swap spread for the eight largest banks as evidence.

But the board said the Tarp's track record is mixed at best.

To prove the infusions are working, the board said, the Treasury must monitor the lending of banks that receive capital.

"Although Treasury notes that it is also monitoring the effects of capital infusions on lending, it does not state what metrics it plans to use," the report says. "While both tightened credit standards and the economic slowdown undoubtedly have depressed lending, these events do not justify the failure to measure whether the Tarp capital investments are having a positive effect on lending. We therefore hope to learn how Treasury plans to measure this important variable. We stated in our first report that we believed Treasury should monitor lending at the individual Tarp recipient level, and we again restate that recommendation."

The report also criticizes the executive compensation restrictions on banks that receive Tarp money, saying they are too weak.

"While some executives at some financial institutions have voluntarily reduced their compensation, there is no uniform program in place," the report said. "The panel continues to ask Treasury to explain why it has not required more [from] financial institutions."

The oversight panel — consisting of Prof. Warren; New York State Banking Superintendent Richard Neiman; Damon Silvers, an associate counsel at the AFL-CIO; Rep. Jeb Hensarling, R-Tex.; and former Sen. John Sununu — is scheduled to release recommendations for restructuring the financial system Jan. 20.

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