State insurance commissioners may well be called upon to assure accountability in the expenditure of taxpayer dollars that are targeted to various public policy objectives. Hopefully, they will do a better job than federal agencies appear to be doing.

The Government Accountability Office has released a report–”Troubled Asset Relief Program: Additional Actions Needed to Better Ensure Integrity, Accountability, and Transparency”–which raises serious questions regarding the integrity of the most significant rescue plan that has been launched in response to the growing economic crises that now affect far more than just lending institutions.

Although acknowledging the complexity and scope of a program that existed for less than 60 days at the time of its assessment, GAO expressed concerns with the quality of the government's oversight and questioned whether banks were complying with the rules pertaining to executive compensation.

Many scholars, op-ed columnists and consumer advocacy groups have questioned the fundamental goals of TARP and other rescue plans, asserting that too much attention is being paid to helping out large institutions (often precisely according to the logic that they are “too big to fail,” and then creating more such institutions), while ignoring the financial disasters that are striking many working families struggling with troubled mortgages.

Fair-housing groups have noted that the subprime lending at the root of these problems reflected long-standing, racially discriminatory practices that for decades denied credit to minority markets and then targeted them with predatory products that eventually led to record foreclosure rates, declining property values and tax revenues, cuts in essential public services, and other severe community costs.

The GAO report calls for the Treasury to take steps “aimed at improving the integrity, accountability and transparency of TARP.” Specifically, GAO calls for Treasury to:

o Assure that rescue funds are being used in ways that are consistent with the goals of the program.

o Communicate with Congress and the public regarding program activities.

o Hire and train a sufficient number of personnel to adequately oversee performance.

o Develop a system for managing potential conflicts of interest.

State insurance commissioners need to be prepared to take similar actions, and more, as additional insurers participate in these initiatives. What must they do?

o Clear regulations need to be spelled out so that elected officials and taxpayers understand how public funds are being spent and how effectively public policy objectives are being met.

o Effective monitoring procedures need to be set in place so that programs can be evaluated and, where necessary, modified on a timely basis.

o Implement these bailout programs on an equitable basis to assure that no unfair discrimination occurs in spending these public funds or in the activities of recipients in general.

Assuring such accountability requires far greater transparency than currently prevails.

Equity concerns have received the least attention as the economic crisis has increasingly dominated the news. But these are not “back burner” issues to be addressed once the “larger” problems are resolved. They need to be addressed as part of the economic recovery process.

There are specific steps the National Association of Insurance Commissioners and individual state regulators can take to assure such equity.

Home Mortgage Disclosure Act-like accounting of where policies are being written, as well as paired-testing, are two critical tools that state insurance commissioners need to develop–or contract out–so that equity becomes a central piece of the accountability that should be demanded of all insurers.

(For further details on these tools, see “More Transparency Needed In Sale Of Homeowners Insurance,” on page 34 of NU's April 21, 2008 edition, as well as “States Need More Data To Stop Unfair Discrimination,” on page 34 of NU's Sept. 15, 2008 edition.)

To paraphrase an often-quoted observation, if there is no justice, there will be no recovery.

Integrity, accountability and transparency are vital to the nation's economic recovery efforts. State insurance commissioners can be in the position of showing the way for the entire nation.