MICHAEL R. CRITTENDEN
The Wall Street Journal
February 25, 2009
WASHINGTON — The U.S. government’s rescue of the financial system is vulnerable to fraud that could potentially cost taxpayers tens of billions of dollars, government watchdogs warned lawmakers Tuesday.
Neil Barofsky, the special inspector general for the $700 billion Troubled Asset Relief Program, told a House subcommittee that the government’s experiences in the reconstruction of Iraq, hurricane-relief programs and the 1990s savings-and-loan bailout suggest the rescue program could be ripe for fraud.
He also said fewer than 5% of banks receiving government aid have responded to a request about what they have done with their bailout money.
The comments come as the Obama administration prepares to pour more money into the financial sector. Federal banking regulators begin a series of “stress tests” at the largest U.S. banks this week to determine whether they need greater infusions of government funds to survive a worse economic downturn.
“History teaches us that an outlay of so much money in such a short period of time will inevitably draw those seeking to profit criminally,” Mr. Barofsky said.
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