The Treasury Department is lax about keeping records of its negotiations with bailed-out banks, including undocumented conversations in which billions of taxpayer dollars are at stake, a new watchdog report says.
Treasury fails to keep meeting minutes or notes from phone calls with banks that received money from its $700 billion financial bailout, says the report from Neil Barofsky, the Special Inspector General for the bailout fund.
Barofsky's audit concerns Treasury's negotiations to sell bank warrants – securities that allow the holder to buy stock in the future at a fixed price. Treasury received the warrants from hundreds of banks as a deal-sweetener as it injected billions of dollars to stabilize the reeling banking sector.
The report blasts Treasury for failing to keep complete notes about the process by which it sells those warrants after banks have returned their bailout money.
"When a brief telephone call can mean the difference of tens of billions of dollars, it is a basic and essential element of transparency and accountability that the substance of that call be documented," Barofsky writes.
The warrants were designed during the financial crisis to give taxpayers an extra benefit if the bailouts were successful in calming the stock market and reviving the banks. When stock prices rise, the warrants become more valuable because holders can pocket the difference.