A Fighting Chance

Treasury secretary Henry Paulson went before Congress and explained that the financial system had stalled. He insisted that only a government rescue could get things moving again and prevent a complete financial collapse. And thus was born the Troubled Asset Relief Program—TARP.

In theory, TARP had two goals aimed at getting the economy back on track. First, it was supposed to stabilize the banking system. The idea was that if the banks had more cash, they would start lending again, and that would mean that large and small companies could all get back to business. The other goal was that TARP would bring the mortgage crisis under control. The details of the plan were sketchy, but the general idea was that a lot of the TARP money would eventually be used to clean up the terrible mortgages that had been sold to a lot of hardworking American homeowners, so that they wouldn’t be forced into the streets. This second goal was reflected in COP’s statutory mandate: we were specifically instructed to report to Congress on the “effectiveness of foreclosure mitigation efforts.”

As soon as TARP was set up, tens of billions of dollars started flowing to the giant banks. Although a couple of huge financial institutions had already fallen, it soon became clear that Treasury would make sure the other giant banks would survive the crisis. But that didn’t keep credit flowing to the small businesses, and more and more of them were shutting down. At the same time, the tide of foreclosures just kept rising. In those early, terrifying days, TARP seemed to be doing precious little for small businesses or families in trouble.





Ten Questions

So when would our new oversight panel issue its first report? We knew that once we sent out the first one, we would be running on a treadmill we couldn’t get off. By law, we would have thirty days until the second report was due, thirty days until the third report, and so on, for the next two years. We would have no chance to pause and catch our breath—we would have to go all out.

If Congress had set up a panel like this in ordinary times, the date for the first report might have been far into the future, allowing plenty of time for everyone on the panel to get to know each other, conduct research, hire staff, and map out a strategy. But these weren’t ordinary times. The country was in a crisis, and Congress wanted a report now. We could either stand on the sidelines or wade in and do whatever we could to help.

The day before Thanksgiving, we had our first official meeting, which was held by conference call. The new COP still didn’t have an office or any staff. We didn’t even have a coffeemaker. In fact, the last two panelists had just been chosen only the week before. The Republicans had named Jeb Hensarling, a congressman from Texas, and Judd Gregg, a senator from New Hampshire. Representative Hensarling joined our call that day, but Senator Gregg wasn’t available. (He soon resigned, temporarily leaving us with only four members.)

The panel voted to name me chairman, and we agreed to get a report out as soon as we could. We settled on December 10 as our first due date, which meant we had exactly two weeks to decide which issues to address, conduct research, write the report, review it, vote on it, and send it out. Ooh boy.

With the clock ticking, I offered to write a first draft of the report and send it around to the other panelists.

So there I was on Thanksgiving morning, baking a cake. Bruce and I usually celebrate Thanksgiving in Plymouth, just a few miles from Plymouth Rock, where the Pilgrims landed. The Plymouth locale is just a coincidence. Bruce’s sister Gretchen and her family live there, and the relatives all gather at their house. Her husband, Steve, makes homemade pastas and lays out an amazing feast, Italian American style. I offer my thanks by making his favorite dessert, apricot upside-down cake. This year Bruce and Otis would take the cake without me, and they promised to bring back some leftovers.

After I put the cake in the oven, I stared at my computer screen and wondered: What did it mean to conduct oversight in the middle of a raging storm? And what could we actually accomplish?

I figured we were supposed to serve as a kind of watchdog. A watchdog’s job was to bark so that everyone would look up to see a threat. Our economy was collapsing, millions of people were out of work, families were losing their homes, retirement funds were disappearing, and right now one of the very few tools granted to the government to deal with this crash was $700 billion given to Treasury through TARP. How Treasury spent that money could determine whether the economy pulled out of its tailspin and how the recovery would be forged. Treasury had made it clear in our first meeting that they weren’t planning to cooperate with the COP watchdog, so if oversight was going to mean anything, these reports might be all we had.