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The committee assigned by Congress to keep track of whether the Treasury has spent the money from the TARP wisely has come out with its latest report which keelhauls Henry Paulson and his colleagues.

The panel seems most concerned about the secretive way that Paulson has decided to go about his business and the fact that much of the money was not used to help mortgage-holders.

According to The Wall Street Journal, the report says, "The panel’s initial concerns about the [Troubled Asset Relief Program] have only grown, exacerbated by the shifting explanations of its purposes and the tools used by Treasury."

The criticism is perverse for several reasons.

It is hard to say that the Treasury has been secretive when everything has been done out in the open. The process leading up to those decisions may have been clouded but that is probably because fixing the failing financial system required remarkably fast action. Stopping to ask permission would be delaying a process in which time was the major enemy. Keeping Citigroup (C) from a financial disaster was not something which could have been done over several months. Catching it as it fell could not have worked unless it was completed in a matter of days.

Another issue the panel has with Paulson is that he has not used the money as he said he would when  Congress passed the bill creating the TARP. Treasury originally said it would buy toxic assets from banks to allow them to operate with better balance sheets. It became clear within a short period that valuing assets which do not trade cannot be accomplished either practically or quickly. Paulson decided to put money into the banks though buying equity. The banks are more financially stable now, so the default use of the funds probably worked.

The last significant problem the oversight committee has is that the TARP funds were not applied to help solve the mortgage crisis. Even a brief analysis of what that would require raises the question of how the Treasury would pick through hundreds of thousands of mortgages to decide which were worthy of getting aid. Even if the process had been handed to banks with the Treasury providing funds, the mechanism to get money into the hands of troubled homeowners would have taken a number of months and would have created a tremendous bureaucracy to run.

There may be a number of attacks which could be leveled at Paulson’s actions. To say that he was rash or irresponsible in the face of an unprecedented collapse in the credit system should not be among them.

Douglas A. McIntyre