The NYT has a story about the chairwoman of the panel created to oversee the TARP program. There are actually two stories in this article, although I’m sure the NYT doesn’t see it that way. The first story is the one in the headline – the Treasury plan has been haphazard:

Elizabeth Warren, the chairwoman of the oversight panel, said in an interview Monday that the government instead seemed to be lurching from one tactic to the next without clarifying how each step fits into an overall plan.

“You can’t just say, ‘Credit isn’t moving through the system,’ ” she said in her first public comments since being named to the panel. “You have to ask why.”

If the answer is that banks do not have money to lend, it would make sense to push capital into their hands, as the Treasury has been doing over the last two months, she continued. But if the answer is that their potential borrowers are getting less creditworthy with each passing day, “pouring money into banks isn’t going to fix that problem,” she said.

I don’t think anyone would argue with that assessment. One of the major problems has been that the market is uncertain about what the next action will be. There is no coherent plan that can be adduced from Paulson’s actions so far except for his vague generality about stabilizing the financial system. The questions at the end of the quote though point to the second story in the article. What the chairwoman is really saying is that she has a problem with what has been done so far because it conflicts with her preferred policy position.

Where did Warren come from?

A Harvard law school professor and a consumer bankruptcy expert, Ms. Warren was named by Senate Majority Leader Harry Reid to the new five-member panel, created as part of the $700 billion Troubled Asset Relief Program, known as TARP, enacted in October. She was elected chairwoman at the group’s first meeting last Wednesday.

What would a consumer bankruptcy expert favor as a policy solution? Well, naturally she focuses on the consumer:

Meetings with Treasury officials so far have made her question whether they understand that “household financial health is profoundly tied to the economic health of the nation,” she said. “You cannot repair this economy if you can’t repair those families, and I’m not sure the people directing the bailout see that as their job.”

In her view, the government should be trying to create more reliable customers for those banks by shoring up the fragile finances of the millions of American families that could not save, borrow or spend even if their banks were flush with capital.

“Any effective policy has to start with the households,” she said. “Years of flat wages, low savings and high debt have left America’s households extremely vulnerable.”

What is the purpose of the oversight board? According to OMB watch their first report covers:

“the use of contracting authority and administration of the program;” “impact of purchases made under the Act on the financial markets and financial institution;” “extent to which the information made available on transactions under the program has contributed to market transparency;” “effectiveness of foreclosure mitigation efforts;” and the “effectiveness of the program from the standpoint of minimizing long-term costs to the taxpayers and maximizing the benefits for taxpayers”

Warren is trying to make policy, which does not appear to be her job. She is to report on the effectiveness of the policy being carried out, not provide advice about what she thinks the policy ought to be. It is up to Congress and Treasury to decide policy, not the oversight board.

The other members of the board will also have agendas. Damon Silvers, an associate general counsel of the AFL/CIO and Richard Neiman, the superintendent of New York banks bring their own prejudices to the table and will no doubt have their own ideas about policy.

This panel will also be competing with the two other entities tasked with some form of oversight. Bureaucratic infighting should ensue quickly. This is the problem with these types of big government programs. Too many individuals with their own agendas all competing to get heard and none of them really doing their job of oversight. Here’s my prediction: there will be a large scandal at some point with the TARP program and all the oversight committees will miss it.