WASHINGTON — The Obama administration is increasing transparency in the government's controversial $700 billion financial rescue program and said Wednesday that more reforms are in the works.
Treasury Secretary Timothy Geithner is promising an even bigger overhaul of the program and said such action will be announced relatively soon.
The administration is considering a range of options for how to change the program, Geithner said, including the creation of a bad bank to buy up the toxic assets now weighing down the banking system.
Geithner made his comments at the beginning of a meeting with Elizabeth Warren, the head of the congressional panel created to oversee operation of the bailout fund, which was approved by Congress in October to deal with the worst financial crisis to hit the country since the 1930s.
The program has come under heavy attack for how it was operated during the Bush administration. Critics say the decisions were veiled in too much secrecy and the former administration did not impose enough restrictions to make sure banks used the billions of dollars they were receiving to increase lending.
The change Geithner announced Wednesday will require that all contracts the government reaches to disburse money will be posted in full on the Internet.
Geithner said the Treasury Department, which is running the bailout program, also will work to post contracts reached by the previous administration so the public can be fully informed. He pledged that the change on making full contracts available was just the first of many the new administration will implement to improve the performance and accountability of the program.
"In the coming weeks, we will unveil a series of reforms to help stabilize the nation's financial system and get credit flowing again to families and businesses," Geithner said.
In his first full day in office on Tuesday, Geithner said the new administration was tightening the rules governing how companies are selected to receive bailout support. The new rules are designed to crack down on lobbyist influence over the program and make sure political clout is not a factor in awarding rescue money.
The new rules on lobbying came in the wake of reports filed with the government showing some big banks stepped up their lobbying efforts late last year even after they received billions of dollars from the bailout program.
In addition to possibly creating a bad bank to purchase toxic assets, the Obama administration is also considering other changes to the program. It has pledged to use up to $50 billion of the second $350 billion to bolster efforts to combat a rising tide of mortgage foreclosures.
The administration also is exploring using the bailout fund to guarantee assets still being held by banks much like was done in expanded support programs provided to Citigroup Inc. and Bank of America Corp.
The Bush administration handled the first $350 billion of the rescue program under the direction of former Treasury Secretary Henry Paulson. His operation of the program drew heavy criticism from lawmakers and the oversight panel for not being transparent and for failing to attach enough conditions to ensure that banks receiving support used the money to increase lending to consumers and businesses.
Along with the new lobbying rules, the administration of President Barack Obama has pledged to better track lending patterns by financial institutions to ensure that they are using the government assistance to increase lending. The new administration also has sought to limit executive compensation at institutions receiving government support and prevent shareholders at those companies from benefiting at taxpayers' expense.
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