During the most recent economic recession, the federal government spent over $475 billion to stabilize banking institutions, restart credit markets, and help struggling families avoid foreclosure. Significant amounts of money never made it to the homeowners lawmakers were attempting to help, but was instead squandered by state agencies whose citizens were hit the hardest by the economic downturn.
The “great recession” was “one of the most profound events in generations, with huge consequences on the American economy and households throughout the country.” Nearly nine million jobs were lost and four million homes foreclosed on in the United States. In response to drastic economic decline, Congress established the Troubled Asset Relief Program (TARP), which “helped stabilize the U.S. financial system, restart economic growth, and prevent avoidable foreclosures.”
One program established under TARP is the Hardest Hit Fund (HHF), which provided “targeted aid to families in states hit hard by the economic and housing market downturn.” The Department of Treasury (Treasury) funneled $9.6 billion to 19 states working on projects such as homeowner mortgage assistance, blight demolition, and first-time homebuyer down payment assistance. These 19 states were selected due to the particularly morose economic conditions of the state at the beginning of the recession.
To ensure families received these funds and to cut down on financial waste, Congress created the Special Inspector General for the Troubled Asset Relief Program (SIGTARP). SIGTARP found nearly $11 million worth of waste by state agencies, which were spending TARP funds in violation of federal regulations. These were outlined the various spending sprees of state agencies in a blistering 72-page report. Among the expenditures were “parties, picnics, other celebrations, a Mercedes Benz car allowance, gifts, gym memberships . . ., settlements for discrimination and other potential violations of the law. . ., a luxury office suite,” and other costs unrelated to HHF. SIGTARP also identified instances when state officials stayed at luxury hotels while attending conferences, some of which had little or no relevance to HHF or TARP. One glaring example occurred in August 2014, where two Indiana state officials spent over $5,000 in four nights at a resort in California while “training a contractor to conduct underwriting for the Hardest Hit Fund.” These expenditures were incurred while the poorest Americans were still struggling to recover from the worst economic downturn in nearly a century.
The SIGTARP report is a profound
example of the necessity of oversight, especially when critical programs the
size of TARP are involved. If Americans were “fed up with the treatment of American tax money in a way that
involves fraud and mismanagement . . .” in 1978, then
the abuses documented in this report show that unconscionable waste continues
to be a problem. State officials drove rented Mercedes to five-star resorts on
the taxpayer’s dime, while families were fighting against foreclosure. These
expenditures occurred because Treasury lacked effective oversight controls and
did not hold states accountable for properly reporting their expenditures. Still, in the past fiscal year alone, SIGTARP has recovered $161
million in waste within TARP. For
perspective, the SIGTARP operating budget is only $34 million. This is just one
of the many examples where the implementation of strong oversight controls is a
wise investment that pays for itself. Not only has SIGTARP saved the government
money, but it works to restore faith that taxpayer dollars will not be spent
erroneously or on unnecessary activities. If Congress is serious about
eliminating waste in the federal bureaucracy, it should invest heavily in the
development of oversight controls and measures.
 Alabama, Arizona, California, Florida, District of Columbia, Georgia, Illinois, Indiana, Kentucky, Michigan, Mississippi, Nevada, New Jersey, North Carolina, Ohio, Oregon, Rhode Island, South Carolina, and Tennessee.
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