Senate bill cracks down on bailout recipients

WASHINGTON — One of the first orders of business for the new Congress next month will be making sure that banks and other firms that received some of the $700 billion economic bailout reveal how they are spending it.

Under legislation proposed by Sens. Dianne Feinstein, D-Calif., and Olympia Snowe, R-Maine, firms receiving federal rescue money would be required to report their spending to the Treasury Department every three months. And it would prohibit them from spending the taxpayer dollars on lobbying or political contributions.

The Senate did not take up the legislation this year, and the sponsors have long said they plan to pursue it when the 111th Congress convenes Jan. 6.

They announced a "reintroduction" of it on Tuesday — a day after The Associated Press reported that the nation's largest banks say they can't track exactly how they're spending the money or simply refuse to discuss it.

"At present, we don't know whether these companies are using these funds to fly on private jets, attend lavish conferences or lobby Congress," Feinstein said in a statement.

Snowe said the bill would ensure that taxpayer money would only be used for the intended purposes: to shore up the nation's financial institutions and other firms during a wide-reaching economic recession.

The AP contacted 21 banks that received at least $1 billion in government money and asked four questions: How much has been spent? What was it spent on? How much is being held in savings? What's the plan for the rest?

None of the banks provided specific answers and most refused to explain why they are keeping the information secret.

Nearly every bank AP questioned — including Citibank and Bank of America, two of the largest recipients of bailout money — responded with generic public relations statements explaining that the money was being used to strengthen balance sheets and continue making loans to ease the credit crisis.

Lawmakers say they want to tighten restrictions on the remaining, yet-to-be-released $350 billion block of bailout money before more cash is handed out. Treasury Secretary Henry Paulson said the department is trying to step up its monitoring of bank spending.

In a letter sent Tuesday to Paulson, Sen. Susan Collins, R-Maine, said she joined those Americans who were "astonished and outraged" that banks were not explaining how the money was being spent.

"This lack of transparency and accountability is deeply troubling," Collins wrote. "The current lack of reporting requirements is unacceptable and cannot be allowed to continue."

The bill is S. 3698.

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