Lack of Transparency in Administration’s Toxic-Asset Purchase Program Raises Key Conflict-of-Interest Questions

WASHINGTON. D.C. – House Committee on Oversight and Government Reform Ranking Member Darrell Issa (R-CA) sent a letter today to Treasury Secretary Timothy Geithner and National Economic Council Director Lawrence Summers regarding the framework established by the Administration for the Public Private Investment Program (PPIP).

“I was troubled to learn that the PPIP designates a select few ‘fund managers’ and restricts participation in the plan to an elite group of industry titans,” Issa says in the letter. “I am puzzled that given the goal to ‘maximize the inflow of private capital into the market in an expeditious manner’ and create a liquid market for the toxic assets, you would so drastically limit the number of potential participants in the program.”

The guidelines for participation established by the Administration significantly restrict and limit the number of potential participants in the program. Only a few select firms such as BlackRock, Pimco, Goldman Sachs, Legg Mason, and Bridgewater would meet the requirements to participate in the effort to purchase toxic-assets.

“This elite circle of people influencing the Administration’s economic policies and plans includes Laurence Fink, the chairman and CEO of BlackRock, who hopes to play a potentially lucrative role in the administration’s bank rescue plan,” Issa says. “Treasury’s plan anoints a select group of fund managers to make significant profits. Reports indicating that at least one of the potential beneficiaries of the plan consults directly with the White House on economic policy matters, raises serious questions about the Administration’s decision making process in developing the plan. I am troubled by the lack of transparency in the PPIP development and decision making process.”

Rep. Issa asks the Administration to provide the Oversight and Government Reform Committee the following information by close of business on Monday, April 20, 2009:

1. A full and complete explanation of why the PPIP restricts applications to firms that already have a minimum of $10 billion in toxic assets under management given the goal of the plan to “maximize the inflow of private capital into the market in an expeditious manner.”

1. All records of communications you or Treasury staff has had referring or relating to the development of the PPIP with any representative of the following companies: BlackRock, Pimco, Goldman Sachs, Legg Mason, and Bridgewater.
2. The names of all outside advisors from the business and/or finance community that you consult with for advice on policy matters.
3. All records of any decision to recuse yourself from participation in any discussion related to the PPIP due to a conflict of interest.
4. Any and all predecisional records of communications referring or relating to the PPIP, including but not limited to any drafts, comments, notes, or memoranda.

The letter to Secretary Geithner is available here.

The letter to Mr. Summers is available here.