Where Did Taxpayer Money Go? Panel Slams Treasury

A five-person Congressional panel led by Elizabeth Warren, a Harvard Law professor, has issued a...

A five-person Congressional panel led by Elizabeth Warren, a Harvard Law professor, has issued a report that is sharply critical of how the Treasury Department, led by Henry Paulson, pictured, is handling taxpayer money in the government's $700 billion aid package.

(AP Photo)

Paulson Defends TARP

"The TARP has been essential and I believe that the decisions we've made with 20/20 hindsight will prove to be the right ones with the TARP, but there's a lot more that still needs to be done," he said in an interview this afternoon with Bloomberg television.

Paulson made no direct reference to the Warren report, but he did speak about at least one issue highlighted by the report: the lack of TARP spending in helping homeowners facing foreclosure.

The government's initial focus, he said, was stabilizing the financial system through investments in banks. Paulson said he was "reluctant to move ahead with a foreclosure plan immediately" because he was concerned about getting "the maximum bang for the buck" and the initial results of early home loan modification "were not encouraging."

He suggested that it would be up to the incoming Obama Administration to deal with the foreclosure crisis.

"I think this is something that Congress and the American people want and I'm going to look with interest at what the next team does here because I think it's important," he said.

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ABC News' Survey of 16 TARP Banks

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The Congressional Oversight Panel plans to issue another report with recommendations on stemming foreclosures.

Among the other issues raised in today's report:

Executive Compensation: The panel asked why the Treasury Department hasn't developed a "uniform program" to limit executive compensation at banks receiving TARP funds, noting that there have been "extensive conditions" imposed on auto companies that are receiving TARP money.

"Healthy" Banks, "Overvalued" Assets? The report noted that the Treasury Department initially said that it would invest funds in "healthy" banks, naming Citigroup among them and providing the bank with $25 billion. But less than a month later, Treasury gave Citi $20 billion in additional financing "apparently to avoid systemic failure."

"These events suggest that the marketplace assesses the assets of some banks well below Treasury's assessment," the report said. "Until asset valuation is more transparent and until the market is confident that the banks have written down bad loans and accurately priced their assets, efforts to restore stability and confidence in the financial system may fail."