Pelosi Calls on Paulson to Strengthen Conflict of Interest Rules for Financial Rescue Package to Ensure Taxpayers are Protected


Washington, D.C. — Speaker Nancy Pelosi today called on the Secretary of the Treasury Henry Paulson to strengthen the conflict of interest provisions included in the Emergency Economic Stabilization Act (EESA) to ensure that taxpayers’ interests are protected.   Pelosi said that the conflict of interest interim guidelines for contractors and asset managers who will be hired by the Treasury to run the program fall short of meeting the standards directed by Congress to protect taxpayers. 

In a letter to Secretary Paulson, Pelosi writes: “As I have reviewed the interim guidelines issued by Treasury yesterday, and those in Treasury’s solicitation for asset management and other portfolio management services, I am very concerned that they fail to meet the tough conflict of interest standard directed by Congress in the legislation.” 

Pelosi concluded: “We all need to assure the American people of our commitment to meaningful oversight and to protecting the interests of taxpayers.  I therefore urge you to reconsider your interim guidelines and to strengthen them to avoid even the appearance of conflicts of interest by the same financial institutions who may also benefit” from this program.

The full text of the letter to Secretary Paulson is below:

October 7, 2008

 

Secretary Henry Paulson

Department of the Treasury

1500 Pennsylvania Ave., NW

Washington, D.C. 20220

Dear Secretary Paulson:

All Americans are hopeful that the recently enacted Emergency Economic Stabilization Act will be successful in instilling confidence in our financial markets.  The original proposal which you submitted to Congress in mid-September did not contain essential provisions to ensure appropriate independent oversight, judicial or administrative review, or adequate safeguards to avoid conflicts of interest.  As you are aware, Congress added several provisions to this legislation to significantly increase independent oversight, accountability, and transparency.  In particular, Congress voted overwhelmingly to include provisions to avoid or minimize conflicts of interest.

The new law provides the Treasury Secretary discretion to decide how to address conflicts of interest through guidelines, regulations, or by prohibiting them altogether.  As I have reviewed the interim guidelines issued by Treasury yesterday, and those in Treasury’s solicitation for asset management and other portfolio management services, I am very concerned that they fail to meet the tough conflict of interest standard directed by Congress in the legislation.

Under these guidelines, companies that benefit from the Troubled Assets Relief Program (TARP) may also be eligible to offer asset management or other contractor services if Treasury personnel approve a mitigation plan.  These guidelines would appear to permit financial institutions with a clear conflict of interest to participate in the management of the TARP, a situation that provides insufficient protection to taxpayers.  Given the significance of the TARP for the recovery of our financial markets, the American public must have complete confidence that those managing the program are doing so entirely for the benefit of the public and not to benefit their own self-interests.

We all need to assure the American people of our commitment to meaningful oversight and to protecting the interests of taxpayers.  I therefore urge you to reconsider your interim guidelines and to strengthen them to avoid even the appearance of conflicts of interest by the same financial institutions who may also benefit from the TARP.

best regards,

NANCY PELOSI

Speaker of the House

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