Senators Feinstein and Snowe Introduce Legislation to Ensure Accountability for Companies Receiving Federal Lifelines and Ban Lobbying with Rescue Funds
Nov 20 2008
Washington, D.C. – U.S. Senators Dianne Feinstein (D-Calif.) and Olympia Snowe (R-Maine) have introduced legislation to establish public reporting requirements and increased accountability for companies receiving financial lifelines from the Troubled Asset Recovery Program (TARP) or emergency loans from the Federal Reserve.
The Accountability for Economic Assistance Act would also ban companies receiving economic rescue funds from using that money to lobby Congress, make political contributions, or pay for junkets.
“The public needs to know that its tax dollars are being put to good use, and this requires transparency to the greatest extent possible” said Senator Feinstein. “The economic stabilization bill included provisions to monitor the distribution of public funds, but it lacked similar reporting requirements to account for how rescued firms spend taxpayer dollars. Congress promised the American people transparency and oversight, and the “Accountability for Economic Assistance Act” will make good on that promise.
“It’s bad enough that we were forced to put billions of tax dollars at risk to rescue the economy, so taxpayers must not be forced to subsidize K Street in Washington,” said Senator Snowe. “This bill will make sure that public money will not be used for lobbying.”
In the two months since Congress passed the Emergency Economic Stabilization Act (Public Law 110-343), news reports have uncovered multiple instances in which rescued firms have made unnecessary and frivolous expenditures. These include more than $500,000 spent by executives of American Insurance Group (AIG) for a weekend at a resort spa in California and a pheasant hunting trip in England.
In addition, the Wall Street Journal reported in October that AIG continued to lobby state regulators to delay the implementation of strengthened mortgage industry licensing standards after receiving $120 billion in federal assistance.
Last week, Treasury Secretary Paulson announced that the $700 billion approved by Congress to stabilize financial markets would not be used to purchase illiquid assets but rather to make direct capital injections into financial institutions.
Given this new mission, and in light of the fact that more than $1 trillion taxpayer dollars have been put on the line to rescue troubled financial institutions this year, it’s vital to establish stronger transparency and accountability.
The Feinstein-Snowe bill (S.3698) would:
- Prohibit firms receiving economic assistance from Treasury or emergency loans from the Federal Reserve from using such funds for lobbying expenditures or political contributions;
- Require that firms receiving assistance provide detailed, publically available quarterly reports to Treasury outlining how federal funds have been used;
- Establish corporate governance standards to ensure that firms receiving federal assistance do not waste money on unnecessary expenditures; and,
- Create penalties of at least $100,000 per violation for firms that fail to meet the corporate governance standards established in the bill.
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