Saturday, February 07, 2009

Internal Control, Valuation, Strategy

The Inspector General for the TARP has published his first report. Would you have guessed that the management of the program does not get an "A"? The biggest concerns are listed in my title above.

There really are few controls to ensure that our money is being spent and spent wisely. As for strategy, there is no portfolio management at all (how long should we hold these securities, what should the selling price be). Valuation of those securities purchased thus far seems to be out of whack as it looks like we got $78 billion less than we thought we had bought.

The valuation issue affects not only the past. The Fed will be spending another $600 billion buying up student loans, car loans and credit card debt. Who will value these securities? The same rating agencies who valued the CDOs.

If you don't want to read the 189 page report, read this.

No comments: