Finally, an Answer on Bank Lending

How are banks using the aid they have received from the federal government? A chief investigator, Neil Barofsky, told Congress in a hearing yesterday that banks are providing new loans to customers, retiring debt, or buying mortgage-backed securities. This answer is the first of its kind since the government launched the $700 billion Troubled Asset Relief Program (TARP). Barofsky dismissed the doubts that banks could disclose such information.

"One thing is clear," he said. "Complaints that it was impractical, impossible, or a waste of time to require banks to detail how they use TARP funds were unfounded."

Barofsky told the Senate Finance Committee that some responses were general, but others provided granular detail on spending, including identification of specific loans made possible with TARP money.

The government has given some $300 billion to the banks so far, and has committed to spending billions more. Barofsky's testimony came as the Government Accountability Office, the investigative arm of Congress, released its own assessment of the bailout and called on the Treasury Department to increase transparency and oversight.

Treasury's Neel Kashkari, manager of the bailout, called these recommendations a thoughtful step forward in a letter to GAO.

But some lawmakers are frustrated with the freedom that TARP has given banks. Barofsky estimated that $2.9 trillion in taxpayer money is at risk.

This is a huge, unprecedented financial commitment, said Sen. Max Baucus, D-Mont., the committee's chair.

"It strains the comprehension of taxpayers and policymakers alike," Baucus said.

Lawmakers showed willingness to increase G.A.O.'s power to follow the money wherever it goes. Baucus and Sen. Chuck Grassley of Iowa, the top Republican on the Finance Committee, have introduced legislation that would give GAO access to financial records and other data of banks participating in the aid program.

"I start with the premise that the public's business ought to be public," Grassley said, "and the expenditure of this money Ive put in the category of public."