President-elect Barack Obama announced yesterday that Nancy Killefer will be appointed as his Chief Performance Officer, a new position Obama has created to make federal programs more efficient and more responsive to those they serve and to help eliminate or modify programs that aren't well. Killefer has experience working for the Treasury Department during the Clinton administration on fiscal management issues and has served on the IRS Oversight Board during the Bush administration. She currently is a senior partner at the consulting firm McKinsey and Co.

Killefer will be balancing two different roles in the Obama administration - that of the Chief Performance Officer, but also she will be helping to run the management agenda at the Office of Management and Budget. Killefer will also be serving in one of the top roles at the OMB, that of Deputy Director for Management, according to the National Journal.

To her credit, Killefer seems to understand the challenges that await her in this position, stating at a news conference with Obama that "Most of the operational issues that the government faces today have developed over decades and will take time to address." Killefer also seems to approach this position with an open mind and understanding that she needs to engage a variety of stakeholders and work to win the trust of mid-level program managers and other federal employees in order to be successful. Killefer said she is committed to "engaging and drawing on the talents of the federal workforce in order to deliver on our promise of a new more efficient and effective government."

There is still a lot to learn about how Killefer will approach this position and how big-ticket items like PART and GPRA will be addressed. But her initial statements are encouraging that her review and assessment work will be more transparent and accessible than those used during the Bush administration. Let's hope she retains that approach as she navigates a complex federal bureaucracy and overlapping and at times inadequate systems the government currently uses to assess the performance of programs.

Today is the official start of the 111th Congress, with new Senators and Representatives being sworn in and votes on a new rules package expected in the House. The House Majority Leaders office put out a fact sheet that describes the new rules package. Donny Shaw, blogging over at OpenCongress has a nice summary of some of the key changes in the House rules, or you can read more details about the new rules package on the House Rules Committee website.

The two big issues we are following in the new rules package are PAYGO and earmark disclosure. Let's start with PAYGO. The new rules continue what the Speaker's office and Majority Leader's office are calling the "tough PAYGO rules" from the 110th Congress that helped "reinstitute fiscal discipline." The House PAYGO rule is also aligned with the Senate's version so both the House and Senate can use the same baseline from the Congressional Budget Office. This alignment is a smart change, but I cringe every time Democrats trumpet their move to reinstate PAYGO in the 110th Congress and claim the righteousness of fiscal responsibility. While it is better to have the rules on the books than not, too often legislation was passed in the 110th Congress that was not deficit neutral, particularly when it came to tax cuts. So while the 110th Congress was better than most in recent memory, there is still a long way to go before we can say Congress shows true fiscal discipline. Democrats (and Republicans too) are going to need to bring a stronger commitment to actually following PAYGO rules during the 111th.

Second, earmark disclosure. It appears new rules for disclosure of earmark requests are continuing to inch toward the 21st Century, sort of. The releases from the Democratic leadership are a bit vague about earmark rules, but the Appropriations Committee Chairman - Rep. David Obey (D-WI) in the House and new Senate Appropriations Chairman Daniel Inouye (D-HI) - also issued a release today that gives a bit more detail. The two major reforms come closer to embracing a proposal that Sen. Jim DeMint (R-SC) introduced during the 110th Congress that would post information on earmarks online before votes on legislation, not after. Specifically, Obey and Inouye are calling for:

Posting Requests Online: To offer more opportunity for public scrutiny of member requests, members will be required to post information on their earmark requests on their websites at the time the request is made explaining the purpose of the earmark and why it is a valuable use of taxpayer funds.

Early Public Disclosure: To increase public scrutiny of committee decisions, earmark disclosure tables will be made publically available the same day as the House or Senate Subcommittee rather than Full Committee reports their bill or 24 hours before Full Committee consideration of appropriations legislation that has not been marked up by a Senate Subcommittee.

It isn't exactly clear how this new online disclosure rules will work or how much good it will do. For instance, in order to track and analyze the earmark requests, a clear link between a Member's earmark request website information and the Appropriations Subcommittee tables will be necessary. It would be better for public access and easier for lawmakers if earmark requests were put into a central online database that was fully searchable, but getting them to put information up online at all, and before voting, is a welcome and long overdue change.

Update:
Bill Allison at the Sunlight Foundation has a more succinct post about the proposed earmark reforms and why Congress can't create a better system. And Roll Call has a story up about the new rules as well, although there isn't much new info there.

The Budget Brigade would like to wish you all a great holiday season and a super New Year.

We would also like to thank all of our readers for following our work supporting us in 2008. We will be on vacation until January, but will return in 2009 to continue keeping an eye on things.

Image by Flickr user wan · der · lust used under a Creative Commons license.

We're on the verge of the holidays this Monday and the Associated Press reported yesterday that bank executives around the country received an early present this year, courtesy of Joe and Jane Taxpayer:

Banks that are getting taxpayer bailouts awarded their top executives nearly $1.6 billion in salaries, bonuses, and other benefits last year, an Associated Press analysis reveals.

The rewards came even at banks where poor results last year foretold the economic crisis that sent them to Washington for a government rescue. Some trimmed their executive compensation due to lagging bank performance, but still forked over multimillion-dollar executive pay packages.

Benefits included cash bonuses, stock options, personal use of company jets and chauffeurs, home security, country club memberships and professional money management, the AP review of federal securities documents found.

The total amount given to nearly 600 executives would cover bailout costs for many of the 116 banks that have so far accepted tax dollars to boost their bottom lines.

We reported earlier this year about bank and financial institution executives who were receiving outrageous salary, bonus, and retirement packages after running their companies into the ground. John Thain, CEO of Merrill Lynch, who received the largest compensation for 2008 in the AP study, made headlines earlier this month when he lobbied for at least a $10 million bonus (he argued he was brought in after the risky decisions were made and managed to sell the company off to Bank of America. Hmmm...).

It's bad enough that the leaders of these institutions are being rewarded with unimaginable amounts of money for horrible performance, but the fact they are being paid with taxpayer dollars is enough to make anybody say "good grief." Happy Holidays!

Image by Flickr user K!T used under a Creative Commons license.

With the announcement of a TARP-sponsored bailout of GM and Chrysler, Treasury Secretary Henry Paulson said that the remaining $350 billion authorized in the TARP legislation would have to be released by Congress.

In the very short-term, the allocated but not yet disbursed TARP balances, in conjunction with the powers of the Federal Reserve and the FDIC, give me confidence that we have the necessary resources to address a significant financial market event. It is clear, however, that Congress will need to release the remainder of the TARP to support financial market stability. I will discuss that process with the congressional leadership and the President-elect's transition team in the near future.

And asking for the remainder is really just a formality. When Congress wrote the Emergency Economic Stabilization Act -- the law that created the Troubled Asset Relief Program (TARP) -- it put a few bumps in the road for the administration by requiring that the President ask for the $700 billion in a series of installments. But Congress made it virtually impossible to say "no."

The final installment request can only be stopped by a join resolution from Congress, and join resolution can only be enacted into law with the signature of the president. And since it will be the president asking for the money, it would be rather queer that he would deny his own request by approving Congress's denial. Congress, of course can override the veto, but that two-thirds-majority-override hurdle is pretty tall.

Image by Flickr user rcrowley used under a Creative Commons license.

Disturbing story in The Washington Post this morning indicating that the executive compensation provisions in the Troubled Asset Relief Program (TARP) may not apply to any the firms that have received money under the plan.

Congress wanted to guarantee that the $700 billion financial bailout would limit the eye-popping pay of Wall Street executives, so lawmakers included a mechanism for reviewing executive compensation and penalizing firms that break the rules.

But at the last minute, the Bush administration insisted on a one-sentence change to the provision, congressional aides said. The change stipulated that the penalty would apply only to firms that received bailout funds by selling troubled assets to the government in an auction, which was the way the Treasury Department had said it planned to use the money.

Now, however, the small change looks more like a giant loophole, according to lawmakers and legal experts. In a reversal, the Bush administration has not used auctions for any of the $335 billion committed so far from the rescue package, nor does it plan to use them in the future. Lawmakers and legal experts say the change has effectively repealed the only enforcement mechanism in the law dealing with lavish pay for top executives.

And that's bad as it goes, but if this bit is true, Congress needs to seriously reevaluate its trust in Secretary Paulson.

Lawmakers agreed to the Treasury's request that the measure apply only to executives at companies whose assets were bought by the government through auctions. In the executive-compensation tax section, a new sentence saying that eventually was inserted.

Meanwhile, Paulson repeatedly told lawmakers that he did not plan to use bailout funds to inject capital directly into financial institutions. Privately, however, his staff was developing plans to do just that, Paulson acknowledged in an interview.

We're not totally shocked, of course. In September, we warned Congress that it should take a deep breath and carefully consider the risks. Let's hope this is a learning moment for Congress and that it will be a little more judicious with nation's checkbook.

TARP's Congressional Oversight Panel (COP)-- one of the Troubled Asset Relief Program's (TARP) oversight institutions -- now has a website.

Pop on over to http://cop.senate.gov/ to follow the panel's reports and announcements.

Here's COP's chair Elizabeth Warren explaining the panel's duties.

The Congressional Oversight Panel (appropriately acronym'd "COP") of TARP asked the really big question that the architects of the program has yet to answer: What's the point of TARP?

The COP report was released to a House Financial Services Committee hearing on the program on Dec. 10. The hearing was a four-hour session of slappy face in which Congressmen lined up to express dismay and ask pointed questions of TARP executor Neel Kashkari and other TARP-related authorities like interim Comptroller General Gene L. Dodaro, and COP members Elizabeth Warren and Rep. Jeb Henarsling (R-TX).

• Rep. Melvin Watt (D-NC): "People are asking me, 'Is Goldman Sachs running this country?...What are we doing giving $700 billion and there is this monopoly on who is controlling it. Nobody is accounting to anybody for it. And the perception, whether the reality is correct or not, the perception is that there is something sinister going on here."
• Rep. Virginia Brown-Waite (R-FL): "We have been sold a pig-in-a-poke and a bait-and-switch has occurred"
• Rep. Davis Scott (D-GA): "We've been lied to. We've been bamboozled. What we have here is one big mess."
• said Maxine Waters (D-CA): "You have done nothing...What is your resistance to helping homeowners stay in their homes?"

My personal favorite line of questioning came from Rep. Brad Sherman (D-CA) on the Treasury Department's rules on executive compensation, because it highlights just what a joke the executive compensation provisions in TARP are. See the clip:

Wall Street Journal: "Treasury Criticized on Hill Over TARP"

The Washington Post: "Panel Overseeing Bailout Criticizes Treasury Department"

The New York Times: "Blunt Advice for Treasury on Progress of the Bailout "

Portfolio: "T.A.R.P.: Tearing Apart the Rescue Plan"

Bloomberg: "Congressional Panel Overseeing U.S. Bailout Criticizes Treasury "

Reuters: "Lawmakers rap Treasury on bailout plan"

Associated Press: "Anger, doubt aired in financial bailout hearing"

The Congressional Oversight Panel, a committee created by the Troubled Asset Relief Program (TARP) legislation released its first report today. And because appointments to the panel were made only weeks ago, they had little time to conduct an investigation. So, rather than expose any waste, fraud, or abuse, the panel's 38-page report is an enumeration of questions that it feels Treasury should answer.

To wit:

• What is Treasury's Strategy?
• Is the Strategy Working to Stabilize Markets?
• Is the Strategy Helping to Reduce Foreclosures?
• What Have Financial Institutions Done With the Taxpayers' Money Received So Far?
• Is the Public Receiving a Fair Deal?
• What is Treasury Doing to Help the American Family?
• Is Treasury Imposing Reforms on Financial Institutions that are taking Taxpayer Money?
• How is Treasury Deciding Which Institutions Receive the Money?
• What is the Scope of Treasury's Statutory Authority?
• Is Treasury Looking Ahead?

The report's repeated assertions that the public has a right to know certain information and that the public also needs to understand why Treasury is undertaking the actions that it does is encouraging. We're looking forward to future reports from the panel, which, hopefully, will bring greater transparency to TARP, because this report indicates quite a few areas of opacity in the program.

Image by Flickr user sean dreilinger used under a Creative Commons license.

WaPo:

Neil M. Barofsky will become a special inspector general within the Treasury Department to audit and investigate spending by the Troubled Asset Relief Program.

The special IG is the sole executive branch officer with the power to oversee the potential conflicts of interest and miscalculations in the program. Armed with a $50 million budget and dual-reporting responsibility to Congress and the president, the special IG has the independence to audit and investigate every transaction and subpoena every record associated with the rapidly changing program.

And yet it took two months from the time the Treasury Department started spending the $700 billion before the special IG's job was filled. [emphasis ed.]

The Bush administration acted immediately to appoint the rest of the bailout team, but it waited six weeks to nominate Barofsky as special inspector general. Then, his confirmation was held up anonymously by one senator. The opposition was finally lifted last week.

It appears that the anonymous hold on Neil Barofsky, President Bush's nominee for the Special Inspector General for the Troubled Asset Relief Program has been lifted. The Senate is expect to proceed expeditiously when they return to action next week.

There's no word, however, on the identity of the anonymous holder.

Thomas Frank wrote an excellent column in the Wall Street Journal before Thanksgiving that is a great overview of the problems of a government contracting system run amok. The entire column is worth reading, but here's a key passage:

Instead the [federal spending] expansion went, largely, to private contractors, whose employees by 2005 outnumbered traditional civil servants by four to one, according to estimates by Paul Light of New York University. Consider that in just one category of the federal budget -- spending on intelligence -- apparently 70% now goes to private contractors, according to investigative reporter Tim Shorrock, author of "Spies for Hire: The Secret World of Intelligence Outsourcing."

Today contractors work alongside government employees all across Washington, often for much better pay. There are seminars you can attend where you will learn how to game the contracting system, reduce your competition, and maximize your haul from good ol' open-handed Uncle Sam. ("Why not become an insider and share in this huge pot of gold?" asks an email ad for one that I got yesterday.) There are even, as Danielle Brian of the Project on Government Oversight, a nonpartisan watchdog group in Washington, D.C., told me, "contractor employees -- lots of them -- whose sole responsibility is to dream up things the government needs to buy from them. The pathetic part is that often the government listens -- kind of like a kid watching a cereal commercial."

Frank calls for a bold vision at the end - a massive government investigation to bring accountability to federal contracting systems and reconstitute the process. Might not be a bad idea.

Buried in this article on Secretary of Defense Robert Gates staying in office for the incoming Obama Administration, is this mention of the next war funding request from the current administration:

And Gates said that the next request for emergency war funding, an estimated $83 billion, would be delivered to Congress in a matter of weeks. If approved, it would bring the cost of the wars in Iraq and Afghanistan to about $947 billion.

I guess this news is competing emergency financial rescue sums with the word "trillion" attached to their numbers. Anyway, $83 billion is still a lot of cheddar, so this is something to keep an eye on.

An F/A-18C Hornet assigned to Strike Fighter Squadron (VFA) 113 refuels from a U.S. Air Force KC-135R Stratotanker aircraft while two F/A-18E Super Hornets assigned to VFA 115 fly alongside during flight operations above Afghanistan Aug. 28, 2008. VFA 113 and VFA 115 are attached to Carrier Air Wing 14 aboard the Nimitz-class aircraft carrier USS Ronald Reagan (CVN 76). (DoD photo by Cmdr. Erik Etz, U.S. Navy/Released)

That's the title of a report released today by the Government Accountability Office (GAO). The report, prescribed by the Troubled Asset Relief Program (TARP) legislation, is the first of a recurring series to the appropriate committees of Congress and the Special Inspector General for TARP.

GAO has some concerns.

Treasury has yet to address a number of critical issues, including determining how it will ensure that CPP is achieving its intended goals and monitoring compliance with limitations on executive compensation and dividend payments. Moreover, further actions are needed to formalize transition planning efforts and establish an effective management structure and an essential system of internal control.

Image by Flickr user Auntie P used under a Creative Commons license.

One of the oversight bodies created by the Troubled Asset Relief Program (TARP) legislation is the Congressional Oversight Panel. The panel -- composed of five members appointed by Congressional leadership -- has only recently been named, but has held briefings with Treasury Department officials.

The panel's first report, due Dec. 10, will "[lay] out the central questions that Treasury should be addressing as it spends the taxpayers' money." While this seems elementary, the panel's chair, Harvard law professor Elizabeth Warren, believes that Treasury has been shoveling cash -- some $242 billion so far -- into the financial system without a real strategy.

"You can't just say, 'Credit isn't moving through the system,' " she said in her first public comments since being named to the panel. "You have to ask why."

If the answer is that banks do not have money to lend, it would make sense to push capital into their hands, as the Treasury has been doing over the last two months, [Warren] continued. But if the answer is that their potential borrowers are getting less creditworthy with each passing day, "pouring money into banks isn't going to fix that problem," she said.

This sort of criticism might have been more effective a few hundred billion dollars ago (never mind before Congress handed $700 billion to the Treasury Department). Rather than put oversight mechanisms in place before handing out wads of cash to banks, Congress chose to dither and wait until a good chunk of change walked out the door before asking questions.

And speaking of oversight, the TARP Inspector General post remains vacant because a Senator (from Kentucky, perhaps?) has put an anonymous hold on his nomination. So not only was the president late in naming his nominee, but now the Senate gets to stand by, blindfolded, as a torrent of Benjamins pour out of the Treasury, because one of their colleagues has unilaterally decided to keep TARP from better oversight.

Image by Flickr user Liquid Paper used under a Creative Commons license.