TARP Inspector General Conducting 20 Criminal Investigations On Bailout Money

April 21, 2009 5:29 a.m. EST

Washington, D.C. (AHN) - The special inspector general for the government's $700 billion financial bailout program, or Troubled Asset Relief Program (TARP), is expected to release a report on Tuesday saying that his office has begun 20 criminal probes involving fraudulent use of taxpayer money.

In his quarterly report to Congress, TARP inspector general Neil Barofsky says the investigations are looking int possible tax fraud, insider trading and other crimes to which the bailout is "inherently vulnerable."

He also warns the Treasury Department that its plan to buy up toxic assets and bad mortgages from banks by partnering with private investors must not be implemented unless stronger oversight is put in place.

Treasury Sec. Tim Geithner in February had announced the administration's plan for the remaining funds in the TARP, which include a program, the Financial Stability Plan, that will use private and public capital to help troubled banks and restore credit flow. Under the Financial Stability Plan, toxic securities will be bought through a program called the Term Asset-Backed Securities Loan Facility (TALF).

Geithner is expected to discuss the report during his testimony before the Congressional Oversight Panel scheduled for Tuesday.

The report comes as public confidence in government accountability for the bailout has ebbed. There was outcry about the $165 million in bonuses paid out by American International Group (AIG) in March to employees of the company's Financial Products division, the very office that led to the insurance giant's near collapse last year.

Before that, a report from New York state Comptroller Thomas DiNapoli saying federally-bailed out firms gave financial employees a total of $18.4 billion in 2008 because the TARP had imposed limits to executive pay, including bonuses, but none for lower-level employees. That report had prompted the Obama administration to impose new restrictions on executive compensation and stronger limits on retirement packages, called golden parachutes.

Congress approved the TARP last October amid strong GOP opposition despite appeals from the top Republican, former President George W. Bush. Issues with oversight soon followed. Lawmakers only allowed the new administration access to the $350 billion after repeated assurances that more oversight would be set in place when funds are distributed. Obama also had to pledge $50 to $100 billion for a "sweeping" effort to prevent foreclosures.

The first TARP infusions under the new administration was made on Jan. 23, and amounted to $386 million. Twenty-three "healthy" banks from across the country were provided capital, the biggest of which was the $111 million given to Indiana-based 1st Source Corporation.