Earlier today we noted that the Treasury Department had hired staff with the specific attributes needed to carry out its original plan for the bailout -- buying banks' bad assets -- only to then decide that it would change its approach by directly injecting capital. That news raised questions as to whether the department has the right people in place for what's an extremely complex and crucial task.

And a report in today's Wall Street Journal sheds a bit more light on the hiring issues that have plagued Treasury's response to the crisis. It reveals that the department is struggling to bring on enough people to handle the glut of applications for assistance that are flooding in from troubled financial institutions.

Neel Kashkari, the man running the TARP program, said at a recent at a luncheon before a housing organization that the department's Office of Financial Stability is operating at half-staff, with about 40 full-time employees. Kashkari said he hopes to double that number by the time the Obama administration takes over on January 20th.

(And by the way, granted Kashkari needs to keep the pubic informed on what he's doing, but doesn't he have more pressing matters to attend to right now than attending luncheons?)

The Journal adds, not exactly reassuringly:

In the past month, the Treasury has been scrambling to make major policy decisions while at the same time conducting the nuts-and-bolts tasks of finding a permanent staff. Decisions have largely been left up to interim staff members, many from other federal banking regulators, who are temporarily at Treasury but are expected to eventually return to their previous positions.

Part of the manpower problem here may be caused by the impending transition. According to Wayne Abernathy, an executive at the American Bankers Association, many Treasury staffers may be headed for the door in advance of the changeover, making it especially hard to keep the department fully-staffed.

Abernathy also suggests, intriguingly, that it may have been in part because of this very problem that Treasury switched from the asset-buying approach to the capital-injection approach. "I don't think that was a small part of why Treasury in the end abandoned the asset-purchase program," he told the paper. "It's very people-intensive."

But it doesn't appear that the switch has entirely solved the problem. And if, in addition to having too few people, Treasury also has the wrong people, as was suggested by that earlier report we noted, that would hardly help the situation.

This may have more to do with a desperate and extraordinary situation than with any deliberate malevolence or even incompetence, but given the stakes, the Treasury's personnel problems are worth keeping an eye on nonetheless.

Here's an interesting nugget in Congress's response to the financial crisis that hasn't received as much attention as it deserves.

Earlier this month, the Bush administration nominated Neil Barofsky, a federal prosecutor, to be the Treasury Department's special inspector general on the bailout program. That's a crucial post, given the astronomical sums at issue, the broad authority that Treasury has been given to distribute them, the concerns that have been raised about possible conflicts of interest, and the general urgency of our efforts to prevent an economic collapse.

So you'd think Congress would be doing everything it could to get Barofsky confirmed right away. You'd be wrong.

Last week, Sen. Chris Dodd, the Connecticut Democrat who chairs the banking committee, issued a little-noticed statement saying that although the nomination "was cleared by members of the Senate Banking Committee, the leadership of the Senate Committee on Homeland Security and Governmental Affairs, and all Democratic Senators," it was "blocked on the floor by at least one Republican member." (itals ours.)

Senate rules allow any senator to anonymously block a vote on confirmation to any federal post, for any reason.

The rationale for the move remains unclear. But a Washington Post story from a few days before Dodd's statement offers two suggestions. It notes that Barofsky supported Barack Obama, and describes an unresolved "battle between the Finance and Banking committees over which has jurisdiction over the confirmation process."

Blocking an urgent nomination because the nominee, like 52 percent of voters, supported Obama seems petty even by contemporary GOP standards. But a congressional turf war over jurisdiction seems only slightly less so. So either of these two explanations would be a pretty damning indictment of Congress's response to the crisis.

We'll keep you posted as we dig into this...

The Treasury Department had originally intended that the $700 billion of TARP bailout money would go to buying up the bad assets of banks and other financial institutions. But then, as was widely reported, Treasury Secretary Hank Paulson reversed course last month and announced that he would take an entirely different approach, using the money simply to inject new capital into troubled banks.

What have we lost through this flip-flopping? It's impossible to know for sure, but one line from a Tuesday New York Times report offers a hint. The paper notes an interesting finding in an audit of the rescue plan, conducted by the Government Accountability Office:

Treasury already had hired staff members for the initial mission, some of whom were not necessary or best suited for the work required under the new strategy.

So have new staff members, who have specific expertise in the issues involved in the new strategy, now been hired? Or is Treasury assigning the crucial task of rescuing the nation from financial collapse to staffers who aren't the best people for the specific job? We'd love to know.

The rest of the expected contents of the GAO report are hardly more encouraging. The Times says the report "is expected to be critical of the Treasury Department's failure to set up ways to track how its bailout money is being used in the marketplace."

It's also "likely to call for tighter controls over the conflicts of interest that are arising as financial specialists, institutions and law firms are hired for Treasury work that could later aid their private-sector clients."

Both of these potential problems have been highlighted by members of Congress and others in recent weeks.

More on this when the report is officially released next week...

With all the different programs being undertaken by the federal government to rescue the economy, it's hard to keep straight everything that taxpayers are now on the hook for.

That's especially true because the commitments are being made by several different government agencies (primarily the Treasury Department and the Federal Reserve) and even more so, because they come in a range of forms.

Some of these commitments -- for instance, the Treasury's bailout program -- represent actual spending. We could see a return on these investments, of course, depending on how the companies that we've taken on fare going forward, but there are by no means any guarantees.

Others, meanwhile, represent loans backed by collateral, meaning the government would have had to have badly miscalculated for us not to be paid back in full, probably with interest. And some are simply loan guarantees.

So putting an exact figure on exactly how much we've put up doesn't tell us much. But here's our best attempt, based on piecing together several reports, at a non-comprehensive rundown of the major components of the government's effort to stave off a financial collapse.

Spending:

- The Troubled Assets Relief Program, in which Congress allocated $700 billion to the Treasury to buy equity stakes in financial institutions.

- A Federal Reserve program, announced in October, to buy up to $2.4 trillion in commercial paper that companies use to pay bills. That figure represents what eligible issuers could sell, but the Fed has said it does not intend to buy anywhere near that amount. Earlier this week the Washington Post put the amount that it had so far put up at $266 billion.

Read more »

Yesterday, the Washington Post and Bloomberg News both reported on the astronomical sum of money -- the Post put it at almost $900 billion -- that the Federal Reserve is quietly lending to banks and other financial institutions hit by the financial crisis.

Unlike with the $700 billion in bailout money allocated to the Treasury Department, the Fed won't reveal basic details about the program: for instance, which institutions are getting that money, how much they're getting, or which assets are being used as collateral on the loans.

Bloomberg News filed a Freedom of Information Act (FOIA) request, in order to pry loose the information, but the Fed responded that this was "confidential commercial information", reports the Post, and argued that the Federal Reserve Bank of New York, which keeps the information, is not subject to FOIA. Bloomberg has now filed a federal lawsuit against the Fed.

Some in Congress are also concerned. Several members at a hearing of the House Financial Services Committee last week expressed skepticism about the lack of transparency. And a staffer for Rep. Scott Garrett (R-NJ), a member of the House financial services committee, told TPMmuckraker that the congressman will soon send a letter to Fed Chairman Ben Bernanke asking him to provide further details about the loans.

At that same hearing, Bernanke explained the reason for the Fed's secrecy: "There's a concern that if the name is put in the newspaper that such and such bank came to the Fed to borrow overnight for a good reason, that people might begin to worry: Is this bank credit-worthy?" he said. "And that might create a stigma, a problem, and might cause banks to be unwilling to borrow."

Tim Yeager, a former economist at the Federal Reserve Bank of St. Louis, and now a professor of finance at the University of Arkansas, bolstered that view. He told TPMmuckraker that in normal times more disclosure makes sense, but that in times of crisis like this, "if word leaked out" that banks were going to the Fed to borrow money, "there could be a liquidity run."

We've made calls to the House financial services and oversight committees, and the Senate banking and finance committees, to ask whether they have plans to look into the issue further, given the amount of taxpayer money at issue. We'll let you know what we find out.

The Treasury Department is reviewing concerns relating to the $18 million compensation package received by Mack Whittle, the former CEO of South Financial bank, reports the Greenville News.

As we noted yesterday, Whittle moved up the date of his retirement, possibly so that his pay wouldn't be subject to restrictions on companies participating in the bailout program. Last week, South Financial received $347 million as part of that program.

A spokesman with the office of S.C. Rep. Bob Inglis told the Greenville News: "[Treasury is] examining the issue."

Inglis and South Carolina governor Mark Sanford -- who Whittle had in recent years opposed politically -- had asked Treasury to probe the matter. Both are Republicans.

In a letter to Treasury Secretary Henry Paulson, Inglis urged Paulson to close loopholes to prevent executives from gaming the system in the way that Whittle may have done.

As we reported yesterday, Whittle served on John McCain's South Carolina finance team, and raised money for George Bush in 2000.

Whittle, who has said he'll remain on South Financial's board, is also being sued by a company shareholder seeking to block the payment.

Late Update: In fact, the news that Treasury is looking into the Whittle matter was first reported yesterday afternoon by TheStreet.com. The financial news site was also first to raise questions about the timing of Whittle's departure back in October.

Mack Whittle is being sued by a shareholder of South Financial, who is trying to block his $18 million compensation package.

The shareholder, Vernon Mercier, said the suit was prompted by last week's announcement that South Financial would receive bailout funds, reports a South Carolina TV station.

A judge declined Mercier's request for an injunction blocking the payment, but delayed a decision on a motion to dismiss the suit.

A lawyer for Whittle, Billy Wilkins, told the court: "Mack Whittle and his family have given a lot to this community and it's a tough time for him. Particularly to be ridiculed as he has been in the press and accused of things that he didn't do: getting a golden parachute, taking advantage of the taxpayers. All of that stuff is absolutely not true."

Wilkins continued: "[Whittle's] retirement benefits are based solely on an employment contract that had been in existence for over two years when he retired. He's getting nothing more or less than that what he is legally entitled to."

One other point worth noting on the story of Mack Whittle -- the former CEO of a South Carolina bank, whose expedited retirement date ensured that his company could get bailout money without his compensation package being limited by restrictions on CEO pay that were part of the bill.

Whittle got an $18-million golden parachute when he left late last month. But as the bank itself, South Financial, noted in a statement in response to the controversy, less than 15 percent of that total would have exceeded the pay limit imposed by Congress.

In other words, the limits on executive pay that Congress insisted on turn out to have very few teeth. That's in part because there are no limits on pensions -- so Whittle's $9 million pension would have been unaffected.

Senate Democrats last month tried to push the Treasury Department toward establishing stricter limits on executive pay. But during negotiations over the bailout, Treasury expressed the concern that stricter limits would reduce participation in the program.

Pro Publica notes the remarkable tale of Mack Whittle, the former CEO of South Financial Group, a South Carolina bank.

Whittle founded South Financial back in 1986, and under his leadership it grew to be the largest bank in the state. It expanded into North Carolina and Florida, eventually boasting $13.7 billion in total assets and 180 branch offices.

But Florida was one of the hardest hit states when the housing market crashed, and South Financial suffered. In early 2007, the bank's stock was above $26. Today it's at about $3.50. In the third quarter this year, South Financial posted a $25 million net loss.

In early September, Whittle announced that he planned to retire by year's end. A few weeks later, the financial crisis struck, and Congress soon passed a $700 billion bailout bill for banks. South Financial quickly announced that it would apply for bailout money.

Then, in a federal regulatory filing dated October 28, the bank quietly announced that Whittle had in fact stepped down as CEO a day earlier. No reason was given, and Whittle's successor as CEO had not yet been named.

So, why the expedited schedule? Perhaps because Whittle's new leaving date meant that he wasn't subject to limits on executive pay that were imposed as a condition of the bailout. As a result, Whittle enjoyed an $18 million send off, which includes a $9 million pension benefit, and perks like a $133,920 auto allowance and $75,000 for "financial planning." (He'll need some!)

And -- proving you can have your cake and eat it too -- earlier this week, it was announced that South Financial will receive $347 million from U.S. taxpayers as part of the bailout program.

South Carolina governor Mark Sanford, a Republican, has suggested that Whittle may have been "gaming the system" by moving up his retirement date, and has called for a Treasury Department investigation.

The bank said in a statement that the hefty package "reflected [Whittle's] 20 year career with [South Financial Group] as its founder and only CEO."

One expert on executive compensation told Pro Publica: "The whole idea was to avoid these types of arrangements" The Treasury "doesn't want the companies receiving taxpayer funds, terminating executives and having them walk away with excessive golden parachutes."

In this case -- and perhaps in others yet to be revealed? -- it looks like Treasury may have fallen short, to say the least.

Late Update: Given that its South Carolina governor Mark Sanford who's calling on the Treasury Department to investigate Whittle, it's worth noting that -- according to the Columbia paper The State (via Nexis) -- in 2006, Whittle was at the forefront of a group of state business executives who were dissatisfied with Sanford's policies toward business as governor, and backed a potential primary challenger, former state commerce secretary Bob Royall. Royall ultimately decided not to run, but it seems likely that Whittle isn't at the top of Sanford's Christmas card list, to say the least.