While we here in the Budget Brigade are thankful that our respective alma mates are poised to clinch BCS bowl berths (hook 'em, Horns!), we are even more thankful that President Elect Obama has serious concerns about the current BCS system. That's change we can believe in!

The Budget Brigade will return to the BudgetBlog on Monday.

Have a great Thanksgiving and enjoy the day.

Image by Flickr user Jennifer13 used under a Creative Commons license.

There's been a lot of buzz in Washington and around the country the last couple of years about earmarks. It's the new four letter word of politics, with practically every Senator and Representative talking publicly about how awful they are. Yet earmarks in and of themselves are really not the problem. It is the process by which they are enacted that is usually where we run into trouble. The secretive, back-room addition of an earmark to legislation at the last minute, without review, in order to reward powerful special interests, campaign contributors, or other politically connected individuals or groups is where the real proble lies.

The best way to combat that is through transparency, and because of the efforts of a few individuals and organizations, the information on the size and scope of earmarks has improved considerably. Taxpayers for Common Sense (TCS), a watchdog group here in Washington, was at the forefront of publishing earmark information. On February 14, 2008, they published a complete database of FY 2008 earmarks, made available on their website for downloading in an excel file.

This week, the group Legistorm has joined in the earmarks game as well, with a searchable website that allows users to have better access to peruse the database put together by TCS. They launched the website this week and it builds upon the TCS work to promote better access to earmarking data. And lucky for all of us, the new site and the TCS data includes executive branch earmarks - or those earmarks requested by the president. Most of this data is left out of an earlier attempt at earmark transparency put up by OMB.

It looks as though both Legistorm and TCS will continue to have their work cut out for them next year. The House Republican caucus rejected a proposed short-term moritorium on earmark requests today:

For the second year in a row, the House GOP caucus Thursday rejected an effort to limit its members' requests for special projects, or earmarks, in this case a short-term moratorium.

Check out the new resource and search through tens of billions of dollars in earmarks.

The National Journal has been reporting this week that current Congressional Budget Office (CBO) Director Peter Orszag is in line to head up the Office of Management and Budget in the upcoming Obama administration. Orszag formerly served as a senior economic adviser during the Clinton administration and held a post in the economics studies program at the Brookings Institution.

Orszag has been impressive in his two year stint as the head of the CBO, which he began in January, 2007 and I think he would be an excellent choice to run the OMB for Obama. BudgetBlog readers will certainly know that we have high esteem for Dr. Orszag.

Back in August, I blogged about a report issued by the U.S. Senate Permanent Subcommittee on Investigations about how foreign banks, specifically large European banks, were helping wealthy Americans evade U.S. taxes.

This week on Wednesday, the Justice Department, in conjunction with the Internal Revenue Service (IRS), announced the indicment of Raoul Weill, a senior executive at the Swiss banking giant UBS. Sharp BudgetBlog readers will remember that UBS was one of the European banks named in the Senate investigation released over the summer. Seems like things have come full circle for UBS. From the Justice Department press release:

According to the criminal indictment, between 2002 and 2007, Weil oversaw the Swiss bank's cross-border private banking business that provided services to some 20,000 U.S. clients who reportedly concealed approximately $20 billion in assets from the IRS. Weil, who allegedly referred to this business as "toxic waste," mandated that Swiss bankers grow the cross-border business, despite knowing that this would cause bankers to violate U.S. law.

According to the indictment, when given a choice to wind down, sell or spin off the cross-border business, Weil chose to continue the business because of its profitability. Between 2002 and 2007, the United States cross-border business generated between $200 million a year in revenue for the Swiss bank.

Unfortunately, prosecutors may not be able to obtain the information necessary to convict Mr. Weill or expand their investigation to pursue U.S. clients who participated in tax evasion. Even if they are able to convict Mr. Weill, it's not assured that Switzerland would extradite him to the U.S. According to a report in the Wall Street Journal, the Swiss government has "firmly dug in its heels against the U.S. investigation, citing Swiss laws that generally prohibit banks from revealing the names of clients." The U.S. has demanded that the Swiss government step in to assure the investigation can continue, but doing so would likely hurt the prospects for Swiss banks, which have long served as a refuge for the rich and powerful in their attempts to horde assets.

It is unclear how much trouble Mr. Weill has gotten himself into, but if convicted of the felony charge of conspiring to defraud the U.S. government, he could serve up to 5 years in jail. Somehow that doesn't seem to me like enough for stealing $1.2 billion from the American people.

Jail time for Mr. Weill aside, the broader hope is that this case will open up Swiss banks and indeed the international banking industry generally, so we have a more honest, transparent, banking system that is held accountable to laws and regulations. That's the hope, but I'm not holding my breath.

Rethinking the crux of the financial markets crisis and its solutions, Treasury Secretary Henry Paulson announced today that the $700 billion Troubled Asset Relief Program (TARP), originally intended to take toxic financial assets off the books of lending institutions to spur market liquidity, will not be used to purchase such assets.

Over these past weeks we have continued to examine the relative benefits of purchasing illiquid mortgage-related assets. Our assessment at this time is that this is not the most effective way to use TARP funds, but we will continue to examine whether targeted forms of asset purchase can play a useful role, relative to other potential uses of TARP resources, in helping to strengthen our financial system and support lending. But other strategies I will outline will help to alleviate the pressure of illiquid assets.

This statement ultimately undermines the "Do Anything" approach to legislating. When Paulson made his initial pitch for a Wall Street bailout, lawmakers correctly balked. While we noted that Congress should proceed deliberately, they instead rushed a legislative counter-proposal and quickly passed it. And although various objections to such a bailout were offered, one offered by economists was that the underlying problem (and its ultimate solution) of the financial markets crisis was not entirely clear.

Thankfully (I think), the TARP legislation was written with enough flexibility that it allows Paulson to abandon the explicit purpose of the program in favor of adopting strategies (like injecting capital into banks in exchange for equity). Paulson continues to search for an appropriate solution.

For better of worse, Congress crafted a law that gave the Treasury Secretary authority to throw $700 billion at, well, whoever for whatever. Will it work? Who knows? Congressional hearings and empirical research might have helped identify the problem and solution sooner. Instead, Washington decided to the correct course of action was to freak out and throw bails of cash at whoever is asking for it.

A learning moment? Hmmm...

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

On the Depart of Treasury Emergency Economic Stabilization Act (EESA, AKA TARP) website, the Department has posted, according EESA law, a list of transactions made under TARP. And here they are, all $125 billion* worth of them:

Also in accord with the law, Treasury has released its First Tranche Report to Congress. Among other things, the report includes:

• A description of all the transactions made during the reporting period.
• A description of the pricing mechanism for the transactions.
• A justification of the price paid for, and other financial terms associated with, the
• transactions.

However, ProPublica, is one step ahead of Treasury. In addition to transactions completed under TARP, ProPublica is tracking which banks have are participating in TARP's Capital Purchase Program but have yet to receive funds. Their tally indicates that Treasury has committed over $172 billion to banks.