Sen. Chuck Grassley again denounced the Small Business Lending Fund after the Treasury Department notified him that recipients of Troubled Asset Relief Program funds are eligible to participate.
Grassley had raised concerns that banks will use SBLF funds to repay Tarp and wrote a letter to Secretary Tim Geithner asking for more detailed information.
In his response, posted to Grassley's website Thursday, Geithner said the law creating SBLF "expressly directs Treasury to allow Tarp recipients to participate."
Geithner also disputed the notion that SBLF is being used as a "backdoor repayment mechanism" for Tarp, which he said has recovered approximately $251 billion, or $6 billion more than its original investment. None of those funds have come from the SBLF, he said.
In the future, the Treasury plans to break out and report separately any Tarp investments repaid with SBLF funds, Geithner said.
"This response confirms what I was afraid of," Grassley said in a press release issued Thursday. "It's OK with Treasury if banks use their small business lending funds to repay Tarp because supposedly Tarp already has made a profit. That's not how the small business program was sold to the public."
He also complained that the Treasury won't release the names of applicants, and that Geithner's letter didn't explain how Treasury planned to prevent waste and fraud in the program. Geithner's letter said the inspector general and Government Accountability Office, along with a new special deputy inspector general for SBLF, will oversee the program.
"From this response, it seems the Treasury Department is content to give the money out and let the inspector general and GAO try to police any abuse on the back end," Grassley said. "As we've learned with Tarp and the stimulus program … it's nearly impossible to recoup wasted money after the fact."
