As the House engaged in a bit of theatrics designed to show the Obama administration it was serious about TARP reform, the Senate now seems to be reconsidering its carte blanche release of the second $350 billion. But the Frank TARP reform bill addresses substantially more issues of concern to TARP critics than does the Dorgan legislation (still in committee with no cosponsors).
Perhaps most importantly, the Frank bill (H.R.384) prevents any funds from being made available unless between $40 billion and $100 billion are committed to a foreclosure prevention plan. The legislation calls for creation of FDIC's popular and oft-cited loss-sharing foreclosure mitigation program that would prevent an estimated 1.5 million foreclosures. Problems exist with the effort, as noted below, but the truth remains that 0$ of the first $350 billion were spent on foreclosure mitigation. The Dorgan bill (S.195) omits all foreclosure provisions. Is this any way to ensure that a foreclosure mitigation plan will actually be administered?
Though the conditions included in each bill for receiving TARP funds - agreements laying out how the funds will be used - are similar, Frank's provisions are stronger. Frank's bill prevents the use of TARP funds for M&As without certification that the action will reduce taxpayer risk or could have occurred without taxpayer money. Frank's legislation requires reports on lending increases attributable to TARP where the Dorgan bill requires only "a detailed monthly report about how emergency economic assistance...is being used..." This Dorgan provision leaves "the intended objectives and goals of [emergency economic] assistance" undefined, while the Frank legislation requires Treasury to establish "benchmarks" in its agreements with firms receiving TARP assistance.
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