WASHINGTON – Lawmakers are turning up the heat on banks that have received money from the Treasury Department's $700 billion rescue fund after the Associated Press reported that they wouldn't say how they are using the money.
Sens. Dianne Feinstein, D-Calif., and Olympia Snowe, R-Maine, said Tuesday that they will propose legislation next month to force companies that receive money from the fund to report how they have spent it.
The legislation would also prohibit them from spending the taxpayer dollars on lobbying or political contributions. It would also apply to some recipients of the Federal Reserve's emergency lending programs.
The legislation was introduced earlier this year, but the Senate did not take it up. The sponsors have long said they plan to pursue it when the 111th Congress convenes Jan. 6.
"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 be used only for the intended purposes: to shore up the nation's financial institutions and step up lending to consumers and businesses to help revive the economy.
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 Citigroup Inc. and Bank of America Corp., 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.
"It is outrageous that those institutions cannot — or will not — provide information on how they are spending billions of taxpayer dollars," House Speaker Nancy Pelosi said in a statement Monday.
Pelosi said she has asked House Financial Services Chairman Barney Frank, D-Mass., to draft legislation that would ensure government funds are used for more lending to consumers.
Congress will consider that legislation before it votes on whether to release the second $350 billion in bailout money, Pelosi said.
Treasury Secretary Henry Paulson has 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.