What lessons did the U.S. government learn from its unprecedented 2008-09 intervention in the financial markets? The nonpartisan Government Accountability Office says a key take-away is the need for broad transparency that includes identifying what information can be made public, setting clear guidelines for bailout recipients, and creating feedback mechanisms.
A new GAO report, “Ongoing Challenges and Guiding Principles Related to Government Assistance for Private Sector Companies,” recounts the $447 billion in bailout aid to eight big financial institutions and companies that began in the final months of the Bush administration. Today, the government remains a shareholder in American International Group Inc, Bank of America Corp., Chrysler Group, Citigroup Inc., and General Motors as well as the caretaker of mortgage giants Fannie Mae and Freddie Mac.
During the crisis, Treasury Department actions appeared “vague, overly broad, and conflicted” at times, the GAO said. “Questions about the government’s decision to assist Bear Stearns and AIG, but not Lehman Brothers, continued months after the decisions were made.” And, the Treasury Department’s abrupt change in the focus of its Troubled Asset Relief Program — from buying mortgage-backed securities to injecting capital into banks — was a public relations blunder that “may have undermined the initial effectiveness of the program,” the report said.
If federal intervention is ever required again to prevent a systemic crisis, the government should quickly hold town hall meetings with the public, schedule regular updates for congressional committees and hire a communications officer, the GAO said.
Quick Fact: The GAO said Chrysler received at least 1,221 emails from congressional offices and state officials related to the bailout, while GM’s in-box received at least 1,098. About 27 percent of the emails were about dealerships and 11 percent were about auto manufacturing plants.
Other new reports released by the Government Accountability Office (GAO) and departmental and agency Office of Inspectors General (OIG):
- Undercover agents at 15 for-profit colleges say all made deceptive statements to applicants (GAO)
- U.S. Cybersecurity Coordinator should develop national global strategy (GAO)
- NOAA needs $100 million to modernize climate data network (OIG)
- Federal Protective Service must set accountability procedures (GAO)
- State Dept. can encourage less-developed nations to improve carbon emission estimates (GAO)
- Medicaid needs to track state compliance with requirements (GAO)
- USDA, Commerce Dept. face Sept. 30 deadline to award $4.8 billion broadband funds (GAO)
- $175 million still claimed by Bechtel SAIC Co. for Yucca Mountain work (OIG)
- U.S. embassy in Abu Dhabi needs administrative support for military sales (OIG)
- Justice Dept. ill prepared for weapons of mass destruction attack (OIG)
- U.S. AID funding to Kenya to treat, prevent HIV infection (OIG)
- Voice of America’s Chinese branch needs long-range plan (OIG)
- Every state since 2005 received as much funding for highways as they contributed (GAO)
- Social Security Administration contractors create stimulus-funded jobs (OIG)
- U.S. embassy in Haiti needs to upgrade software to manage crises (OIG)