Watchdog Wins Battle With Treasury Department

The treasury seems nervous about what the watchdog organization will find. They don't want the people to know where all the money went.

http://online.wsj.com/article/SB125193355469281319.html

Treasury Retreats From Standoff With TARP Watchdog

By EVAN PEREZ and DEBORAH SOLOMON

WASHINGTON -- The Treasury Department backed away from a standoff over the independence of the special government watchdog appointed to scrutinize how last year's $700 billion financial bailout is being spent.

Neil Barofsky, special inspector general for the Trouble Asset Relief Program, known as Sigtarp, declared victory Wednesday in his effort to clarify that he doesn't answer to Treasury Secretary Timothy Geithner.

Mr. Barofsky has frustrated officials at government agencies and on Wall Street over his far-reaching demands for information. The former federal prosecutor is charged with tracking the money spent to prop up the banking system during the financial crisis and to report the results of his audits directly to Congress.

In a letter Wednesday to members of Congress, Mr. Barofsky said Treasury had withdrawn an earlier request to the Justice Department seeking a legal opinion on how much independence the Sigtarp office enjoys. Mr. Barofsky had told lawmakers he feared that being subject to the Treasury secretary's supervision would be "a threat to our independence."

"We view such withdrawal as Treasury's acknowledgement that Sigtarp is an independent entity within Treasury and that my office and I are not subject to the supervision of the secretary," Mr. Barofsky said in his letter to a group of lawmakers, including Sen. Charles Grassley, (R., Iowa), Rep. Darrell Issa, (R., Calif.), who have pushed for his independence. "We applaud Treasury's decision to bring to a close this needless distraction."

The Treasury Department declined to explain the reason for withdrawing its request to the Justice Department.

Sen. Grassley said, "The inspector general is right. It's good that this needless distraction is over."

Some lawmakers viewed Treasury's request for a Justice Department ruling as an effort to rein in Mr. Barofsky's aggressiveness. "Trying to take away the independence of this oversight reflects the arrogance of officials at Treasury who are wielding immense power over our economy," Rep. Issa said in a statement.

The Sigtarp office, created by Congress when it approved the bailout funds, is part of the Treasury Department and therefore part of the executive branch. But in establishing the office, Congress set strict directives that give Mr. Barofsky broad access to executive branch documents, and require Mr. Geithner to explain if he declines to follow any of Mr. Barofsky's recommendations. That led to some constitutional questions over whether Congress violated the traditional separation of powers and invaded the executive branch's turf.

In April, after butting heads with Mr. Barofsky, Treasury officials asked the Justice Department's Office of Legal Counsel for a ruling to clarify that Mr. Barofsky's office falls under the Treasury secretary's supervision.

Lawyers in that Justice office often handle such complex constitutional questions, and have traditionally ruled that offices such as Mr. Barofsky's are in the president's line of command. That would mean that the president and his Treasury secretary have the power to fire Mr. Barofsky.

The Sigtarp dispute came amid wider tension over the role of government watchdogs. Three inspectors general have been ousted in recent months, including one fired by President Barack Obama.

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