CIT Group Inc. acknowledged today that “policy makers” turned down their request for aid. It’s always sad when a company fails and goes into bankruptcy – people lose their jobs, all the vendor companies that sell them products suffer from the loss of business, etc. But what makes this one especially sad is that CIT, according to Bloomberg News, “specializes in loans to smaller firms, counting 1 million enterprises, including 300,000 retailers, among its customers.”
This news comes on the heels of an appearance by former Secretary of Treasury Hank Paulson before the House Committee on Oversight and Government Reform. Summing up after the hearing, Chairman Edolphus Towns (D-NY) admitted that Congress turned over complete authority to Paulson in the Bailout last fall (Troubled Assets Relief Program, TARP): “with no accountability, no checks and balances.” The result is “seemingly arbitrary decision-making.”
Representatives at the hearing repeatedly accused Paulson of deceiving Congress by telling them (and everyone else) that the bailout money would be used to help homeowners. In the end, it was as if the previous administration pillaged the U. S. Treasury on their way out of town.
In the third of a series of hearings designed around the Bank of America merger with Merrill Lynch, Paulson told the Committee that he had the authority to remove Ken Lewis as head of the bank if he didn’t go through with the merger.
Rep. Jim Jordan (R-OH) said there was “a pattern of deception.” He asked specifically, when did Paulson know that he was going to give the money to the banks – which he did on October 13 – after telling Congress on October 3 that he was going to use it to buy up bad mortgages? Paulson’s response was that he believed Congress knew they were giving him flexibility to do whatever he wanted – so he did.
The question now is this: did Paulson pick and choose among his friends to decide who got a bailout? Special Inspector General Neil Barofsky will report to the House Oversight Committee next week with the release of his quarterly report to Congress on the use of TARP funds. Recall that Barofsky’s office is the only one with the authority to initiate criminal prosecutions. Maybe Paulson is still on his list.