Oversight lags behind bailout outlay

ByABC News
December 9, 2008, 11:48 PM

WASHINGTON -- In passing the $700 billion financial system bailout package, Congress insisted on naming watchdog officials and creating a panel to scrutinize how the money is spent. Yet, oversight of the plan is just getting started after two months have passed and nearly half of the money has been allocated.

The Senate on Monday approved the appointment of a federal prosecutor to be a special inspector general for the bailout plan after the vote was delayed for more than two weeks by an anonymous senator's hold.

Congressional leaders appointed the five members of a special oversight panel in late November, but it has met only once, and one member has quit. Its first report is due today.

The investigative office of Congress found in a report issued this month that the Treasury Department hasn't set up mechanisms to ensure that companies receiving taxpayer money are spending it properly.

As Congress considers a package of loans to the U.S. auto industry and the appointment of an "auto czar" to oversee its restructuring, some members including Sen. Chuck Grassley, R-Iowa are unhappy with oversight of the financial industry bailout, and are looking to do more.

"It's $700 billion. We need to have someone to make sure it's spent according to the law and, obviously, not wasted," said Grassley, the top Republican on the Senate Finance Committee.

Even some companies that may participate are worried the bailout isn't getting enough scrutiny, said lobbyist Peter Peyser, whose clients include financial services companies. "The potential beneficiaries of the program in the financial sector would benefit from a clearer picture of how the program operates, what's expected of them, what the rules will be going forward," he said.

The original bailout plan called for the Treasury Department to buy packages of troubled debt such as subprime mortgages. But Treasury Secretary Henry Paulson changed course and instead allocated $335 billion to invest in the financial sector and back new consumer loans.