Bailout Report Card: What did Obama’s Team Learn? Second in Series

“We need better clarity on the rules of the game.”
- Treasury Secretary Tim Geithner, to House Financial Services Committee, March 24, 2009

Leading economists, members of Congress and the Administration have very different ideas as to the
chances that the Financial Stability Programs (formerly Troubled Asset Relief Programs) will increase
lending, increase the flow of credit, keep families in their homes and ultimately stabilize the economy. No
one may have the complete answer on that – but everyone has a suggestion and a criticism for moving
forward.

A full-scale financial collapse has (at least temporarily) been avoided, but have fundamental problems
been addressed and at what cost long-term? When will American families and the average taxpayer see
the benefit of protecting shareholders of Citigroup, Bank of America or Goldman Sachs? Especially as
their pensions, retirement savings and investments evaporate? What benefits will taxpayers reap for
becoming shareholders of AIG and now General Motors?

The U.S. Public Interest Research Group (U.S. PIRG) determined that one of the most disturbing aspects
at the outset of the bailout programs was that an enormous group of people did not know what the
programs were, how participation was determined, what the money would be used for, what it meant to
accept the money, and if it would ever be returned. Did we mention that this group of people included
Congress, the American taxpayers and even the bankers themselves?

To that end, PIRG investigated and created a report card on transparency and accountability in the hope
that the next Administration would answer some of these very basic questions and begin to hold the
banks accountable for how the money was spent. In February of 2009, U.S. PIRG released its first report
card on how the bailout had been handled by the departing administration in terms of transparency and
accountability, resulting in almost entirely “F” or failing grades.

In terms of transparency, June’s results show marked improvement, as a result of the Obama
Administration’s establishment of online resources, planning documentation, reporting requirements and
taxpayer protection principles for at least some of the programs. Marks have improved marginally for
accountability (holding banks accountable for how they spend the money and how they operate going
forward).

This report updates those findings. The updated findings include:

• Grades improved on every line item on the Report Card, with a C average (the January 2009
Report Card earned a failing average of “F”)
• The new Administration has made important progress around transparency in terms of developing online resources, fact sheets, guidelines, interactive programs and tools to help taxpayers navigate the myriad programs and hundreds of participants
• Lending data is now required for all
• Serious ambiguities in the rules are reflected in poorly defined criteria and definitions for separate
protocol governing “exceptional cases” and some quantities defined only as “substantial assistance.”
banks receiving bailout assistance, both at a summary level and individual bank level While the data results have not shown an increase in lending, at least the data is being collected across the banks, which we hope leads to further evaluation of the program itself
• Foreclosure mitigation data is not yet available (so we don’t know if it’s working), although the
Make Homeownership Affordable program information is user-friendly and thorough
• Because many reforms and new conditions only apply going forward, the institutions that have
received the largest amount of taxpayer dollars will not be subject to some of the new transparency and accountability terms outlined in the Financial Stability Plan. To a large extent, regulators have shut the barn door after the horses are gone – and left the public in debt and in the dark.