The Special Inspector General (SIG) for the Troubled Asset Relief Program (TARP)
Prepared for Members and Committees of Congress
This report discusses the Special Inspector General provisions in the Emergency Economic
Stabilization Act of 2008 (EESA), H.R. 1424, which was enacted as P.L. 110-343on October 3,
2008. This act created a Special Inspector General (SIG) for the Troubled Asset Relief Program
(TARP). Under EESA, TARP funds may be used by the Secretary of the Treasury to purchase
“troubled assets,” defined to include both mortgage-related financial instruments and other types
of securities which the Secretary, after consulting the Chairman of the Board of Governors of the
Federal Reserve System, determines to purchase as necessary “to promote financial stability.”
Currently, the Secretary is concentrating TARP efforts on “direct equity purchases in banks,”
through a Capital Purchase Program, rather than mortgages or mortgage-backed securities. Under
EESA, if the Secretary establishes a TARP, there must also be a program to insure or guarantee
“troubled assets” that were issued before March 14, 2008. The authorities provided to the SIG
TARP by EESA have not changed even though the Secretary of the Treasury has modified the
approach to stabilize the financial industry through the TARP.
The Senate passed S. 3731, the Special Inspector General for the Troubled Asset Relief Program
Act of 2008, on December 10, 2008, which would make modifications to the SIG TARP’s audit
and investigative authorities, grant the SIG TARP temporary hiring power outside of the
competitive civil service process, require coordination with other Inspectors General with regard
to audits and other responsibilities, and make SIG TARP reports publicly available, with certain
exceptions. Other bills addressing the SIG TARP include H.R. 7333, S. 18, and S. 3716.
This report will compare the duties and authorities of the SIG TARP to those of the Special
Inspector General for Iraq Reconstruction (SIGIR) and the Special Inspector General for
Afghanistan Reconstruction (SIGAR), as well as statutory IGs under the Inspector General Act of
1978, as amended (IG Act). The report will also cover the authority that Inspectors General
possess to conduct audits and investigations.
Introduc tion ..................................................................................................................................... 1
EESA’s Provisions Regarding the Special Inspector General for the Troubled Asset Relief
Program (SIG TARP)..................................................................................................................2
Appointment, Confirmation, and Removal...............................................................................2
Supervision .................................................................................................................... ............ 3
Duties and Responsibilities.......................................................................................................4
SIG TARP Reports....................................................................................................................5
Resources ...................................................................................................................... ............ 6
Hiring Staff for the SIG TARP Office.......................................................................................7
Funding ........................................................................................................................ ............. 8
Termination .................................................................................................................... ........... 8
IGs’ Authority to Conduct Audits and Investigations......................................................................8
Backgr ound ............................................................................................................................... 9
EESA Authority to Conduct Investigations and Audits...........................................................10
J urisdicti on .............................................................................................................................. 10
Access to Agency Materials.....................................................................................................11
Authority to Administer Oaths and Conduct Interviews.........................................................13
Possible Rationales for Delaying, Modifying, or Rejecting a Requested Audit or
In vestigation ......................................................................................................................... 14
Author Contact Information..........................................................................................................15
Congress has established statutory offices of inspectors general (IGs) in many executive and
legislative branch agencies, as well as two special IGs for programs and operations funded with 1
amounts appropriated for the reconstruction of Iraq and Afghanistan. The four principal
responsibilities of IGs are: (1) conducting and supervising audits and investigations; (2) providing
coordination and recommending policies for activities designed to promote economy and
efficiency in agency programs and operations; (3) preventing and detecting fraud, waste, and
abuse; and (4) keeping the agency head and Congress fully and currently informed about 2
problems and deficiencies relating to such programs and recommending corrective actions.
The Emergency Economic Stabilization Act of 2008 (EESA), H.R. 1424, which was enacted as
P.L. 110-343 on October 3, 2008, established an additional special IG for the TARP. Under
EESA, TARP funds may be used by the Secretary of the Treasury to purchase “troubled assets,”
defined to include both mortgage-related financial instruments and other types of securities which
the Secretary, after consulting the Chairman of the Board of Governors of the Federal Reserve 3
System, determines to purchase as necessary “to promote financial stability.” Currently, the 4
Secretary is concentrating TARP efforts on “direct equity purchases in banks,” through a Capital 5
Purchase Program, rather than mortgages or mortgage-backed securities. Under EESA, if the
Secretary establishes a TARP, there must also be a program to insure or guarantee “troubled 6
assets” that were issued before March 14, 2008.
1 Provisions establishing SIGIR and SIGAR are located at 5 U.S.C. App. § 8G note. Provisions establishing statutory
IGs are codified at 5 U.S.C. App.
2 5 U.S.C. App. § 4(a).
3 The legislation defines “troubled assets,” as follows:
(A) residential or commercial mortgages and any securities, obligations, or other instruments that
are based on or related to such mortgages, that in each case was originated or issued on or before
March 14, 2008, the purchase of which the Secretary determines promotes financial market
(B) any other financial instrument that the Secretary, after consultation with the Chairman of the
Board of Governors of the Federal Reserve System, determines the purchase of which is necessary
to promote financial market stability, but only upon transmittal of such determination, in writing to
the appropriate committees of Congress.
P.L. 110-343, §§ 3(9)(A) and (B) (emphasis added).
4 Statement of Henry M. Paulson, Jr., Secretary of the Treasury, on Financial Rescue Package and Economic Update
(November 12, 2008), http://www.treasury.gov/press/releases/hp1265.htm.
5 For information on the Capital Purchase Plan and other EESA programs, see Treasury’s website:
6 P.L. 110-343, § 102(a)(1).
The provisions in EESA establishing the SIG TARP are similar to the IG provisions for SIGIR
and SIGAR in many respects. However, there are important substantive distinctions between
these three IGs, which this report will refer to collectively as the “special IGs,” as well as 7
between the SIG TARP and statutory IGs created under the IG Act. Due to the ambiguous nature
of the statutory language in EESA, the scope of the powers and authorities of the SIG TARP is
not clear, as discussed below.
The SIG TARP is a presidentially appointed and Senate confirmed IG, selected “on the basis of
integrity and demonstrated ability in accounting, auditing, financial analysis, law, management 8
analysis, public administration, or investigations.” Unlike statutory IGs under § 3 of the IG Act,
who are also presidentially appointed and Senate confirmed, there is no provision in EESA that
requires the SIG TARP to be appointed “without regard to political affiliation and solely” on the
basis of the skills listed above. Although the absence of the additional IG Act language regarding
political affiliation and appointment based only on job qualification skills does not change the
legal protections that the IG Act and EESA afford to the SIG TARP, the SIG TARP may be less
independent than other IGs as a practical matter, given that the SIG TARP is not subject to the
same appointment constraints.
The nomination of a SIG TARP was required “as soon as practicable” after the establishment of 9
the TARP and the Troubled Assets Insurance Financing Fund. The SIG TARP nominee appeared
in hearings before the Senate Committee on Banking, Housing and Urban Affairs and the Senate
Committee on Finance in November, although the Finance Committee hearing was not an official
nomination hearing. A Senate standing order approved on January 9, 2007, provided for
sequential referral for a nomination to an “Office of Inspector General” to the Senate Homeland
Security and Governmental Affairs Committee after proceedings in the committee with primary
jurisdiction over the “department, agency, or entity.” That order did not refer to special IGs,
however, and both SIGIR and SIGAR are not Senate-confirmed positions, so there was no
controlling precedent for the nomination of a special IG prior to the SIG TARP’s nomination. The
Parliamentarian determined that “the Senate Banking Committee [would] be charged with
7 The Treasury Inspector General for Tax Administration (TIGTA), which was carved out of the Treasury IG and
covers a distinct entity within the Treasury Department—the Internal Revenue Service (IRS)—is another comparable,
though not identical, IG. TIGTA is currently the only statutory IG that exists within an establishment or entity that also
has an agency-wide IG in place.
8 P.L. 110-343, § 121(b)(2). For comparison, SIGAR is the only presidentially appointed, but not Senate confirmed, IG,
while SIGIR is “appointed by the Secretary of Defense, in consultation with the Secretary of State.” 5 U.S.C. App. §
8G note. However, “[t]he President may appoint the [SIGIR] to serve as the [SIGAR], in which case the [SIGAR] shall
have all of the duties, responsibilities, and authorities set forth ... with respect to such appointed position.” Id.
9 P.L. 110-343, § 121(b)(3). SIGIR and SIGAR were required to be appointed “not later than 30 days after the date of
the enactment” of their respective acts. See, e.g., P.L. 110-181, § 1229(c).
reporting the IG nominee to the full Senate.”10 Neil Barofsky was confirmed by the Senate on
December 8, 2008.
Like other presidentially appointed and Senate-confirmed IGs, the SIG TARP can be removed
only by the President, and the President must notify Congress of the reasons for the IG’s 11
removal. The President’s reasons need not be given in writing and no time limit is set.
Unlike IGs in other agencies, who “shall report to and be under the general supervision” of the 12
agency head, the SIG TARP will not be required to report to, or be supervised by, the head of
any agency, including the Secretary of the Treasury. The IG Act does not explicitly define the
meaning of “general supervision” and its legislative history does not appear to address the scope
of the agency head’s supervisory role. A court case relying on the legislative history of the IG Act 13
described the agency head’s supervisory authority over the IG as “nominal.” Instead, under one
interpretation of the SIG TARP’s duties and responsibilities, discussed below, the SIG TARP will 14
report only to Congress and not the agency head. This reporting arrangement would be unique 15
among statutory IGs. Additionally, as discussed further below in the section entitled “EESA
Authority to Conduct Investigations and Audits,” the SIG TARP will have complete discretion in
pursuing audits and investigations, and in issuing subpoenas. The SIG TARP appears to possess
greater latitude in pursuing audits and investigations than the Treasury IG, as the Treasury IG is
one of six IGs that may be prevented by an agency head from initiating, carrying out, or
completing an audit or investigation, or from issuing a subpoena, for specified reasons such as 16
preventing disclosure of national security matters.
In contrast to the SIG TARP, the other special IGs report to, and are supervised by, the Secretary
of State and the Secretary of Defense. SIGIR and SIGAR are also required to keep the Secretaries
of State and Defense “fully and currently informed about problems and deficiencies” in program 17
administration and the need for and progress on corrective action. Additionally, SIGIR and
10 Press Release, Max Baucus, Chairman, Senate Committee on Finance, Baucus Questions Inspector General Nominee
on Responsibilities, Preparedness in Tracking Financial Rescue Program (November 17, 2008).
11 P.L. 110-343, § 121(b)(4).
12 IG Act, §§ 3(a), 8G(d).
13 United States Nuclear Regulatory Commission v. Federal Labor Relations Authority, 25 F.3d 229, 235 (4th Cir.
14 P.L. 110-343, § 121(f)(1). The absence of such supervision provisions does not mean that the TARP itself will be
without an administrator—the Treasury Secretary will be responsible for implementing the TARP through a newly
created Office of Financial Stability. P.L. 110-343, § 101(a)(3).
15 It is conceivable that the President would raise constitutional objections to the direct reporting requirement for the
Inspector General. However, Congress has imposed direct reporting requirements on executive branch officials since
the first Congress. CRS Report RL33667, Presidential Signing Statements: Constitutional and Institutional
Implications, by T. J. Halstead. See U.S. CONST. art. II, § 3; Morrison v. Olson, 487 U.S. 654, 686, 694-95 (1988)
(establishing a two-step balancing test for addressing separation of powers concerns in such situations). In the IG
context, the executive branch would “retain ample authority to assure that the [IG] is competently performing his or
her statutory responsibilities.” Morrison, 487 U.S. at 692.
16 IG Act § 8D. If the Treasury Secretary were to exercise this power over the Treasury IG, the Secretary must notify
the Treasury IG in writing of the reasons for exercising such power. The Treasury IG, in turn, must send this
notification to congressional committees within 30 days.
17 See, e.g., P.L. 110-181, § 1229(a)(3).
SIGAR must coordinate with the IGs for the Departments of State and Defense, and the United
States Agency for International Development IG “in carrying out the duties, responsibilities, and
authorities of the Inspector General.” The provisions for the SIG TARP do not require
coordination with the Treasury IG or other IGs. S. 3731, which passed the Senate on December
10, 2008, would require the SIG TARP to coordinate with the IGs for Treasury, the Federal
Deposit Insurance Corporation, the Securities and Exchange Commission, the Federal Reserve
Board, the Federal Housing Finance Board, and the IG of “any other entity as appropriate.”
EESA § 121(c)(3) provides that the SIG TARP “shall also have the duties and responsibilities of
inspectors general under the Inspector General Act of 1978.” On one hand, this provision could
mean that the SIG TARP would be responsible for all of the IG duties outlined in the IG Act,
presumably as amended, even those that reference interaction with the head of an establishment
or those that reference responsibilities not specifically delineated in EESA. Yet it appears more
likely that § 121(c)(3)’s reference to duties and responsibilities may be limited to those under § 4
of the IG Act, which is entitled “Duties and responsibilities; report of criminal violations to
The provision that grants the SIG TARP the same duties and responsibilities as those of IGs under
the IG Act also appears in the acts that created SIGIR and SIGAR. This provision seems to bridge
some, but not all, of the differences between the authorities of the special IGs and IGs created
under the IG Act. If interpreted broadly, this provision will likely encompass the powers, duties,
and responsibilities in certain sections of the IG Act, including, but not limited to
• §§ 4(a)(2)-(a)(5), which encompass general IG duties and the responsibility to
“keep the head of such establishment and the Congress fully and currently
informed, by means of the reports required by section 5 and otherwise,
concerning fraud and other serious problems, abuses, and deficiencies relating to
the administration of programs and operations”; and
• § 4(d), which requires IGs to report expeditiously to the Attorney General when
there exist “reasonable grounds to believe there has been a violation of Federal
The “and otherwise” language in the requirement that IGs keep Congress “fully and currently
informed” has come to be understood in practice to include testifying at congressional hearings,
direct communications with Members and staff, various selective or specialized reporting
techniques, and responses to congressional inquiries for information, audits, and reports (both
verbal and written).
Depending on how § 121(c)(3) is interpreted, it is possible that the SIG TARP’s responsibilities
will not encompass § 4(a)(1) of the IG Act. That section provides that IGs are “to provide policy
direction for and to conduct, supervise, and coordinate audits and investigations relating to the
programs and operations of such establishment.” Since the provisions creating the SIG TARP
contain specific language with regard to conducting, supervising, and coordinating audits and
investigations, and this specific language does not mention “policy direction,” this provision of
the IG Act would not seem to be included in the duties mentioned in §121(c)(3).
S. 3731, S. 3716, and H.R. 7333 would amend § 121(c) by adding a provision stating that the SIG
TARP “shall have the authority to conduct, supervise, and coordinate an audit or investigation of
any action taken under this title [which covers the TARP] as the [SIG] determines appropriate,”
with the exception of actions taken under EESA §§ 115, 116, 117, and 125. These sections
respectively address graduated authorization granted to the Treasury Secretary to purchase
troubled assets, oversight and audits by the Comptroller General (head of the Government
Accountability Office), a Comptroller General study and report on margin authority “to determine
the extent to which leverage and sudden deleveraging of financial institutions was a factor behind
the current financial crisis,” and the Congressional Oversight Panel.
If the SIG TARP’s duties and responsibilities are interpreted to be confined to those in § 4 of the
IG Act, the above cross reference to “the reports required by section 5” in § 4(a)(5) of the IG Act
appears to subject the SIG TARP to the IG Act § 5 reporting requirements as well. However, it is
not clear as to whether the SIG TARP would need to submit the reports in § 5 of the IG Act in
addition to the reports required in EESA or whether the SIG TARP would only be responsible for
the required reports set forth in EESA.
For example, § 5(d) of the IG Act requires establishment IGs to immediately report “particularly
serious or flagrant problems, abuses, or deficiencies” to the head of the establishment whenever
the IG becomes aware of such issues. The head of the establishment then must send the report to
the appropriate congressional committees within seven days, along with the establishment head’s
comments in his or her own report. Since EESA requires the SIG TARP to report to Congress
only, and not to an establishment head, it is not clear if the SIG TARP would be required to
comply with those reporting requirements in § 5(d) of the IG Act. If EESA is interpreted to
include the reporting requirements in § 5 of the IG Act, then the SIG TARP could be required to
submit certain reports to the establishment head, which would appear to be the Secretary of the
Treasury, as TARP itself has not been designated an establishment.
EESA § 121(f) specifies certain reporting requirements for the SIG TARP, including a report 60
days after the SIG’s confirmation by the Senate and every quarter thereafter. The report must
include “a detailed statement of all purchases, obligations, expenditures, and revenues associated
with” the TARP. The specificity of the language of this report provision could be interpreted to
imply that the “duties and responsibilities” provision in § 121(c)(3) would not extend to the
reporting requirements set out in § 5 of the IG Act, which provides that the IG office must prepare
semiannual reports and submit them to the head of the establishment, who in turn must transmit 18
them to appropriate congressional committees with his or her own report. Alternatively, the IG
Act § 5 reports could be required in addition to the reports set out in EESA.
There is no explicit requirement in EESA that the Treasury Secretary (or anyone else) be allowed
to comment on the reports that the SIG TARP submits to Congress. Although there may be other
reporting requirements with respect to TARP, they would not be intended to respond to SIG
concerns or criticisms. SIGAR and SIGIR have such requirements enabling the Secretaries of
State and Defense to submit comments to the appropriate congressional committees, as well as 19
requirements that the reports be made public, and even published on a website. The IG Act also
provides that the head of the establishment must make the semiannual IG reports and the
18 5 U.S.C. §§ 5(a)-(b).
19 See, e.g., P.L. 110-181, §§ 1229(i)-(k). The President can waive the public availability requirement of the SIGIR and
SIGAR reports for national security reasons.
semiannual establishment head reports available to the public, on request, within 60 days of the 20
establishment head’s transmission of the reports to the appropriate congressional committees.
S. 18 and S. 3731 would add a provision requiring the Treasury Secretary to “take action to
address deficiencies identified by a [SIG TARP] report or investigation,” or to certify to the
appropriate congressional committees “that no action is necessary or appropriate.” Additionally,
S. 3731 would require the SIG TARP to “submit a report to Congress analyzing the use of any
funds received by a financial institution under the TARP” not later than July 1, 2009. S. 18
contains a similar requirement. Under S. 3731‘s amendments, such a report would be publicly
available on the SIG’s website “within 24 hours after the submission of the report.” S. 3731
would also require all reports submitted by the SIG TARP to be publicly available, with
exceptions prohibiting public disclosure of certain information.
It is important to note that EESA § 121(c)(3) will not necessarily encompass the whistleblower
protections in § 7 of the IG Act. These provisions address complaints or information provided by
a whistleblowing employee, the disclosure of a whistleblower’s identity, and reprisals threatened
or taken against a whistleblower. Under the IG Act, not every complaint must be investigated, and
the IG has discretion in accepting complaints from individuals other than employees. However, it
appears that IGs are willing to accept complaints from anyone, not just employees, and the
legislative history of the IG Act does not prohibit IGs from receiving and acting on information or
complaints from any source. On a related note, EESA provides that the Financial Stability
Oversight Board, as established by the legislation, will be responsible for “reporting any 21
suspected fraud, misrepresentation, or malfeasance” to the SIG TARP or the Attorney General.
However, a whistleblower with information concerning the possible existence of illegal activities
or mismanagement regarding the purchase or insurance of troubled assets could conceivably be
covered by the IG Act § 7 protections if he or she reported the information to the Treasury IG, as
opposed to the SIG TARP. The acts that created SIGIR and SIGAR do not contain whistleblower
In view of the fact that the current TARP approach is concentrating on banking concerns, it is
interesting to note that federal law providing whistleblower protection to employees of insured
depository institutions and federal banking agencies applies only to information turned over to 22
federal banking agencies or the Attorney General.
Section 121(d) of EESA states that the SIG TARP will have the authorities of § 6 of the IG Act,
which provides in subsection (c) that the head of an establishment must give the IG office within
the establishment adequate office space, equipment, supplies, and other services. It could be
20 5 U.S.C. App. § 5(c).
21 P.L. 110-343, § 104(a)(3). Additionally, the Comptroller General must submit reports on “the activities and
performance of the TARP and of any agents or representatives of the TARP” to the SIG TARP at least every 60 days.
P.L. 110-343, § 116(a)(3).
22 12 U.S.C. § 1831j.
argued that the Secretary of the Treasury is the head of the establishment in which the TARP is
located, as § 11(2) of the IG Act defines “establishment” to include the Treasury. In addition,
§ 6(a)(3) of the IG Act provides that the IG is authorized “to request information or assistance as
may be necessary for carrying out the duties and responsibilities provided by the IG Act from any
Federal, State, or local government agency or unit thereof.” It is not clear if “assistance” would
cover office space, however, if it does, the SIG TARP would appear to be able to request facilities
and resources from the Treasury Department. In contrast, EESA specifically provides that “[t]he
Secretary shall provide the Comptroller General with appropriate space and facilities in the
Department of the Treasury as necessary to facilitate oversight of the TARP until the termination 23
date established in section 120.”
The provisions in the act creating SIGAR enabled that special IG to rely on the personnel, 24
facilities, and resources of another special IG, SIGIR. SIGIR, in turn, could rely on the
Department of State or the Department of Defense for equipment, office supplies, and
communications facilities and services within either agency, including at appropriate locations of 25
the Department of State in Iraq.
EESA § 121(e) provides that the SIG TARP “may select, appoint, and employ such officers and
employees as may be necessary for carrying out the duties of the [SIG], subject to the provisions
of title 5, United States Code, governing appointments in the competitive service, and the
provisions of chapter 51 and subchapter III of chapter 53 of such title, relating to classification
and General Schedule pay rates.” This provision mirrors the language in SIGIR’s provisions, and
means that SIG TARP employees would be hired under civil service laws. However, Congress
recently provided SIGIR with temporary employment authority that follows the authority granted 26
to temporary federal organizations. Employees in such temporary federal organizations are
excepted from competitive civil service rules in title 5, United States Code regarding 27
appointment, pay, and classification. There are several categories of positions excepted by the
Office of Personnel Management (OPM) from competitive service—Schedules A, B, and C—for
which it is not practical to adhere to qualification requirements of the competitive civil service or
hold competitive examinations or which are political appointments.
H.R. 7333, S. 18, S. 3716, and S. 3731 would give the SIG TARP temporary hiring power outside
of competitive civil service requirements akin to that of SIGIR under 5 U.S.C. § 3161. Such
temporary hiring power would only be in effect for six months under H.R. 7333, S. 3716 and S.
23 P.L. 110-343, § 116(a)(2)(A).
24 P.L. 110-181, §§ 1229(h)(4), (6).
25 See, e.g., P.L. 108-106, § 3001(h)(5).
26 The SIGIR may “exercise the authorities of subsections (b) through (i) of section 3161 of title 5, United States Code
(without regard to subsection (a) of such section).” P.L. 110-181, § 1221(e). Section 3161 of 5 U.S.C. addresses
temporary federal organizations formed “for the purpose of performing a specific study or other project” that are
“terminated upon the completion of the study or projection or upon the occurrence of a condition related to the
completion of the study or project” that have a duration “not in excess of three years.”
27 5 U.S.C. § 3161(b)(3); USAJOBS, How Federal Jobs are Filled, http://www.usajobs.gov/EI55.asp.
Although EESA does not provide for this temporary hiring authority for the SIG TARP, EESA §
studies, analyses, and other services with public agencies and with private persons, and make
such payments as may be necessary to carry out the duties of the Inspector General.” Thus, it
appears that the SIG TARP has the authority to hire employees for the office under such contracts
EESA § 121(g) provides that the SIG TARP shall have $50 million to carry out the duties of the
office. S. 3731 would make such funds available “not later than 7 days” after the SIG is
confirmed by the Senate, while S. 18 would make such funding available three days after the SIG
TARP was confirmed. As mentioned above, SIG Neil Barofsky was confirmed on December 8,
funding for SIGAR, for which $20 million authorized in initial funding was not disbursed.
Congress allotted a total of $7 million, but the SIGAR noted in a report that “due to current th
funding restraints, SIGAR does not expect to reach full operational capacity until the 4 quarter 29
of fiscal year 2009.”
EESA § 121(h) establishes that the office of the SIG TARP “shall terminate on the later of—(1)
the date that the last troubled asset acquired by the Secretary under section 101 has been sold or
transferred out of ownership or control of the Federal Government; or (2) the date of expiration of 30
the last insurance contract issued under section 102.” In contrast, SIGIR and SIGAR “shall
terminate 180 days after the date on which amounts appropriated or otherwise made available for 31
the reconstruction of Iraq [or Afghanistan] that are unexpended are less than $250,000,000.”
While the continuation of the other special IGs is limited based on the amount of the
reconstruction accounts, the SIG TARP may be a continuing necessity to audit the purchase,
transfer, sale, and insurance of troubled assets, in whatever form they may take under EESA § 32
This portion of the report provides a legal analysis of the general ability of IGs to conduct audits
and investigations, as well as the specific authority of the SIG TARP to conduct audits and
investigations. At the outset, it is important to recognize that most IGs have virtually unfettered
28 Karen DeYoung, Official Report Faults Iraq Reconstruction, Wash. Post, December 14, 2008, at A17.
30 P.L. 110-343, § 121(h).
31 P.L. 110-181, § 1221(h), § 1229(o).
32 Under TARP’s Capital Purchase Program, the Treasury Department is contracting to receive, in addition to senior
preferred stock, stock warrants exercisable over a ten-year term. TARP Capital Purchase Program, Senior Preferred
Stock and Warrants, Summary of Senior Preferred Terms, http://www.ustreas.gov/press/releases/reports/termsheet.pdf.
discretion over initiating and conducting audits and investigations dealing with waste, fraud, and
abuse within their own agencies. As a corollary, they may accept, delay, modify, or reject a
request to conduct an audit or investigation from any party, including individual Members of
Congress, officials at the Office of Management and Budget, other IGs, IG councils, agency
officials, and private parties and organizations. Only a provision in a statute could officially order
an IG investigation or audit. However, IGs are intended to serve as an oversight arm of Congress
within agencies, and it is Congress that has explicitly delegated auditing and investigative
functions to IGs. Congress is not prohibited from requesting IGs to conduct audits or
investigations, and no improprieties are raised when a committee or a Member makes such a
request. The legislative history of the IG Act supports the understanding that Congress could ask 33
IGs for information. IGs generally comply with such requests.
Under § 6 of the IG Act, IGs have been granted broad authority to conduct audits and
investigations; to gain direct access to agency records and information; to request assistance from
other federal, state, and local government agencies; to subpoena information and documents; to
administer oaths when taking testimony; and to hire staff and manage their own resources. The
SIG TARP most likely retains these powers as well, as EESA § 121(d) provides that the SIG 34
TARP “shall have the authorities provided in section 6 of the Inspector General Act of 1978.”
However, concerns have been expressed with regard to the SIG TARP’s ability to obtain records
from third parties. The equity purchase transactions under the TARP involve applications to
Treasury from regulated banks, thrifts, bank holding companies, and thrift holding companies,
through their federal regulators, who have access to virtually all the records of the institutions and 35
are required to examine them periodically. Some of these records may be subject to laws 36
preventing disclosure except to bank regulators. On the other hand, this may not be the case
with many of the entities that may be involved in mortgage-related securities purchases, either as
contractors to aid Treasury in pricing the assets or as holders of mortgage-related securities. Such
entities include mortgage-backed securities trusts, hedge funds, and investment banks. The books
of these entities would not have undergone the routine scrutiny involved in bank supervision, and
33 Representative Jack Brooks, the House Floor Manager of the Inspector General bill, explained after completion of
the conference with the Senate that “there is no prohibition [in the bill] with respect to filing [with congressional
committees] all the information which Congress wants. We will be able to get it. There is no problem with it.” 124
Cong. Rec. 32032 (1978) (Rep. Brooks).
34 The Homeland Security Act of 2002 gave law enforcement powers to criminal investigators in offices headed by IGs
appointed under IG Act § 3. P.L. 107-296, § 812 (amending IG Act § 6). Section 11 of the Inspector General Reform
Act of 2008, P.L. 110-409, granted this authority to IGs appointed under IG Act § 8G, the designated federal entity IGs.
It is not clear whether the SIG TARP possesses these law enforcement powers. In contrast, § 1229(g)(1) of P.L. 110-
181, which created SIGAR, specifies that SIGAR “shall have the authorities provided in section 6 of the Inspector
General Act of 1978, including the authorities under subsection (e) of such section.” The provisions addressing SIGIR
contain similar language.
35 Since the institutions which are participating in the TARP Capital Purchase Program include national banks, it is
possible that 12 U.S.C. § 484(a) might be invoked to question the authority of the TARP SIG to conduct an
investigation of the records of a national bank. This statute specifies that “no national bank shall be subject to any
visitorial powers except as authorized by federal law, vested in the courts of justice or such as shall be exercised by
Congress.... ” In the banking context, visitorial powers involve the authority to “visit” a bank and examine its activities
and observance of laws and regulations, including the examination of records.
36 Under 18 U.S.C. § 1906, there are criminal penalties applicable to disclosing certain information from bank
the entities may be unaccustomed to opening their books to federal regulators outside of their
participation in the TARP program.
EESA grants discretion for the SIG TARP in setting investigative priorities and making specific
commitments. The SIG TARP is authorized “to conduct, supervise, and coordinate audits and
investigations of the purchase, management, and sale of assets by the Secretary of the Treasury
under any program established by the Secretary under section 101, and the management by the
Secretary of any program established under section 102, including by collecting and summarizing 37
[certain] information” related to troubled assets. Other than these categories, EESA contains no
requirements or criteria directing what types of audits and investigations might be conducted, at 38
what level and extent, when, and at what expense (within the office’s budget). The authorities
available to the SIG TARP under the duties and responsibilities outlined in IG Act § 4 (which
applies to the SIG TARP per EESA § 121(c)(3)) would still provide the SIG TARP with the
ability to conduct audits and investigations of activities related to EESA funds and would not
appear to limit the SIG TARP’s authority to the TARP-specific duties specified in EESA §
there is no clause in EESA specifying that the SIG TARP may be “prevent[ed] or prohibit[ed] ...
from initiating, carrying out, or completing any audit or investigation, or from issuing any 39
subpena during the course of any audit or investigation.” Additionally, there appear to be no
prohibitions or restrictions in EESA or the IG Act that would prevent the SIG TARP from
inquiring into a matter currently and directly through his or her own office of inspector general at
the request of a committee or Member of Congress.
Additionally, for most IGs, there are no boundaries on the jurisdiction of the IG over agency 40
programs, operations, or internal units. Most IGs are authorized “to make such investigations
and reports relating to the administration of the programs and operations of the applicable
37 P.L. 110-343, § 121(c)(1).
38 However, as previously mentioned, S. 3716 proposes to exclude actions taken under certain sections of the TARP
from the special IG’s authority to conduct audits and investigations.
39 5 U.S.C. App. §§ 3(a), 8D. Only a few agency heads are specifically authorized to prevent, prohibit, or halt an IG
audit or investigation, including the heads of the Departments of Defense, Homeland Security, Justice, Treasury, the
U.S. Postal Service, and the Central Intelligence Agency. 5 U.S.C. App. § 8. (The CIA IG operates under P.L. 101-
193.) Even in such exceptions, however, Congress has taken pains to assure the integrity of its ability to continue to
receive information from these IGs. The six agency heads may exercise this power only for specified reasons—dealing
with national security, intelligence, counterintelligence, ongoing criminal investigations, and other law enforcement
matters—and must notify the IG and Congress of their reasons when doing so. For example, within 30 days of receipt
of the notice of the Secretary of Homeland Security’s decision to prohibit an IG from continuing an audit or
investigation, the IG must transmit a response to the President of the Senate, the Speaker of the House, and to
“appropriate committees and subcommittees of Congress.” 5 U.S.C. App. § 8I(a)(3). In addition, Congress provided
that the exercise of the Secretary’s prohibitory power “should not be construed as limiting the right of Congress or any
committee of the Congress to access any information it seeks” (emphasis added). 5 U.S.C. App. § 8I(b).
40 The IG in the Department of Justice was limited to examining the Federal Bureau of Investigation and the Drug
Enforcement Administration, until an Attorney General directive and a subsequent statutory amendment placed all
department components under the Office of Inspector General’s jurisdiction with the exception of certain misconduct
allegations. P.L. 107-273, § 308.
establishment as are, in the judgment of the Inspector General, necessary or desirable.”41 As with
other references to IG Act § 6, this provision applies to the SIG TARP. Courts have also held that
the IGs’ investigative authority extends to private contractors:
[T]he legislative history of the Act clearly indicates that Congress specifically intended to
extend the OIG’s power of review over private entities working closely with government
agencies because such entities are privy to highly confidential information and are paid large
sums of federal funds for their services, creating a potential risk for abuse both inside and 42
outside government agencies.
Supporting their responsibilities, IGs are “to have access to all records, reports, audits, reviews,
documents, papers, recommendations, and other material available to the applicable
establishment which relate to programs and operations with respect to which that Inspector 43
General has responsibilities under this Act.” There is no limitation on this right of access in the
IG Act. The IG’s ability to “have access to all records” indicates that the IG’s investigative and
audit powers extend into the private sector and to individuals outside the agency, for instance,
when the IG audits contracts with industry or investigates suspected fraud in agency purchases or
other wrongdoing by private individuals in connection with agency operations and programs.
The SIG TARP retains these powers as well, as EESA § 121(d) provides that the SIG TARP “shall
have the authorities provided in section 6 of the Inspector General Act of 1978.” As a result,it
appears that the SIG TARP would be able to access records of third-parties that participate in the
TARP program and that relate to EESA funds. However, additional legislation could make the
SIG TARP’s authority in this area more explicit. In the event that a private entity would not
voluntarily yield its records to the SIG TARP, the IG would have the option of using his subpoena
power, as discussed below.
Section 6(a)(4) of the IG Act, states that “each Inspector General, in carrying out the provisions of
this Act, is authorized ... to require by subpoena the production of all information, documents,
reports, answers, records, accounts, papers, and other data in any medium (including
electronically stored information, as well as any tangible thing) and documentary evidence 44
necessary in the performance of the functions assigned by this Act.... ” Subpoena authority 4546
under the IG Act is delegable, and subpoenas issued under the act are judicially enforceable.
41 5 U.S.C. App. § 6(a)(2).
42 United States v. Hunton & Williams, 952 F. Supp. 843, 849 (D.D.C. 1997) (citing Adair v. Rose Law Firm, 867 F.
Supp. 1111, 1115 (D.D.C. 1994), and holding “[t]he statutory law, legislative history and case law support the OIG-
RTC’s authority to investigate outside contractors for the purpose of detecting and preventing fraud by outside legal
contractors”); see also United States v. Aero Mayflower Transit Co., 831 F.2d 1142 (D.C. Cir. 1987) (upholding the
enforcement order for 377 subpoenas issued by the Department of Defense IG “directed to interstate van lines and their
43 5 U.S.C. App. § 6.
44 5 U.S.C. App. § 6(a)(4).
45 United States v. Custodian of Records, 743 F.Supp. 783, 786 (W.D.Okla. 1990); Doyle v. U.S. Postal Service, 771
F.Supp. 138, 140 (E.D.Va. 1991).
The IG Act contains no explicit prohibition on disclosure of the existence or specifics of a
subpoena issued under this authority. The SIG TARP retains these subpoena powers as well, as
EESA § 121(d) provides that the SIG TARP “shall have the authorities provided in section 6 of
the Inspector General Act of 1978.”
The legislative history of the IG Act addresses the subpoena as an investigative tool intended for
use in both administrative and criminal investigations:
Subpoena power is absolutely essential to the discharge of the Inspector and Auditor
General’s functions. There are literally thousands of institutions in the country which are
somehow involved in the receipt of funds from Federal programs. Without the power
necessary to conduct a comprehensive audit of these entities, the Inspector and Auditor
General could have no serious impact on the way federal funds are expended. . . .
The committee does not believe that the Inspector and Auditor General will have to resort
very often to the use of subpoenas. There are substantial incentives for institutions that are
involved with the Federal Government to comply with requests by an Inspector and Auditor
General. In any case, however, knowing that the Inspector and Auditor General has recourse
to subpoena power should encourage prompt and thorough cooperation with his audits and
investigations. The committee intends, of course, that the Inspector and Auditor General will
use this subpoena power in the performance of is statutory functions. The use of subpena
power to obtain information for another agency component which does not have such power 47
would clearly be improper.
The Justice Department reports that the “the Inspector General[‘s administrative subpoena] 48
authority is mainly used in criminal investigations,” and the courts have held that “the Act gives
the Inspectors General both civil and criminal investigative authority and subpoena powers 49
coextensive with that authority.”
The legislative history of the IG Act also discusses subpoenas of third-party bank records:
[The committee recognizes that there is a substantial ongoing dispute about the propriety of
so-called third party subpoenas: i.e., subpoenaing records of an individual which are in the
hands of an institution, such as a bank. Since U.S. v. Miller, 425 U.S. 435 (1976), individuals
have been regarded as having no protectable right of property with respect to their bank
records. A law enforcement agency can obtain such records from a bank without any
showing of cause to a neutral magistrate or any notice to the individual involved. The
committee notes that progress has been made on legislation concerning financial privacy
which would require notice to be given to an individual whose bank records are being
obtained by a law enforcement agency. Hopefully, this progress will lead to legislation of
46 5 U.S.C. App. § 6(a)(4)(“ ... which subpena, in the case of contumacy or refusal to obey, shall be enforceable by
order of any appropriate United States District Court ... ”); Inspector General v. Banner Plumbing Supply Co., Inc., 34
F.Supp. 682, 686 (N.D. Ill. 1998); University of Medicine and Dentistry v. Corrigan, 347 F.3d 57, 63 (3d Cir. 2003).
47 S.Rep.No. 95-1071, at 34 (1978).
48 Office of Legal Policy, United States Department of Justice, Report to Congress on the Use of Administrative
Subpoena Authorities by Executive Branch Agencies and Entities, 6 (2002).
49 United States v. Aero Mayflower Transit Co., Inc., 831 F.2d 1142, 1145 (D.C.Cir. 1987); see also Inspector General
v. Banner Plumbing Supply, Co., Inc., 34 F.Supp.2d 682, 688 (N.D.Ill. 1998); United States v. Medic Housing, Inc.,
736 F.Supp. 1531, 1535 (W.D.Mo. 1989).
general applicability to all law enforcement authorities, including Inspector and Auditor 50
IGs, and the SIG TARP (through the authorities in IG Act § 6 as provided by EESA § 121(d))
have the authority “to administer to or to take from any person an oath, affirmation, or affidavit, 51
whenever necessary in the performance of the functions assigned by this Act.” The phrase “any
person” indicates that the IG’s investigative powers extend into the private sector and to
individuals outside the agency. Oaths administered by IGs “shall have the same force and effect 52
as if administered or taken by or before an officer having a seal.” False material statements 53
made to an IG under oath may subject an individual to criminal prosecution or perjury charges.
Several court cases discuss an OIG’s ability to conduct interviews in the course of investigations.
In United States Nuclear Regulatory Commission v. Federal Labor Relations Authority (FLRA),
the United States Court of Appeals for the Fourth Circuit noted that the IG Act facilitates the IG’s
auditing and investigative functions by giving “each Inspector General access to the agency’s 54
documents and agency personnel.” The court held that four proposals by a union “regarding
procedures to be followed during investigatory interviews of the agency’s employees by the
Inspector General” were not consistent with the IG Act because “Congress intended that the
Inspector General’s investigatory authority include the power to determine when and how to 55
investigate.” To grant the union’s proposals regarding interviews “would directly interfere with 56
the ability of the Inspector General to conduct investigations.”
The United States Court of Appeals for the D.C. Circuit echoed the Fourth Circuit’s remarks 57
regarding IG independence in United States Department of Justice v. FLRA. The court stated
“there cannot be the slightest doubt that Congress gave the Inspector General the independent
authority to decide ‘when and how’ to investigate; that the Inspector General’s authority 58
encompasses determining how to conduct interviews under oath.” Although both this case and
United States Nuclear Regulatory Commission v. FLRA dealt with OIG interviews of agency
employees, the D.C. Circuit noted that “[a]nyone—whether a union member, a management
official or an individual not employed by the federal government—would be prudent to secure 59
legal representation if they are to be questioned under oath.”
50 S.Rep.No. 95-1071, at 34 (1978)(footnote 7 of the committee report in brackets).
51 5 U.S.C. App. § 6(a)(5).
52 5 U.S.C. App. § 6(a)(5).
53 18 U.S.C. §§ 1001, 1621; see United States v. Debrow, 346 U.S. 374, 377 (1953) (“The oath administered must be
authorized by a law of the United States.”); United States v. Correia, 1995 U.S. App. LEXIS 3061 (1st Cir. 1995)
54 25 F.3d 229, 234 (4th Cir. 1994).
55 Id. at 230, 234.
56 Id. at 235.
57 39 F.3d 361 (D.C. Cir. 1994).
58 Id. at 367 (quoting United States Nuclear Regulatory Comm’n, 25 F.3d at 234).
59 Id. at 368.
In National Aeronautics and Space Administration (NASA) v. FLRA,60 the United States Supreme
Court detailed the independent characteristics of OIGs and their authority to conduct audits and
investigations. The court held that, in the context of a federal labor relations statute, the NASA-
OIG investigative interviewer was a representative of the agency and found that “those
[independent IG Act] characteristics do not make NASA-OIG any less a representative of NASA
when it investigates a NASA employee.... As far as the IG [Act] is concerned, NASA-OIG’s 61
investigators are employed by, act on behalf of, and operate for the benefit of NASA.” The
Court also noted two limitations of the IG Act: (1) it “grants Inspectors General the authority to 62
subpoena documents and information, but not witnesses,” and (2) “[t]here may be other
incentives for employee cooperation with OIG investigations, but formal sanctions for refusing to 63
submit to an OIG interview cannot be pursued by the OIG alone.” Rather, the OIG may request
assistance from the agency head “insofar as is practicable and not in contravention of the law,”
which has been interpreted to mean that the agency head could direct the employee to appear at 64
an OIG interview.
As noted above, an IG has discretion in mounting audits and investigations. This means that the
IG may decline a request to conduct an audit or investigation. For instance, other investigative
priorities might take precedence in the IG’s judgment. Or the IG might determine that indications
of wrongdoing or lax enforcement are insufficient to warrant the office of inspector general’s
commitment to investigate them.
Additionally, the IG might consider that an investigation now could prove disruptive to, delay, or
compromise any ongoing administrative and judicial proceedings. An immediate IG investigation
might also prove counterproductive to future inquiries, including an effort by the office of
inspector general itself. Along these lines, an investigation started after the conclusion of
administrative and judicial proceedings could benefit from the possible presentation of additional
Finally, certain practical considerations might delay or prevent an investigation. Possibilities
include: already existing commitments for specific investigations and audits; competing priorities
for new audits and investigations; limitations on office of inspector general resources now and for
the remainder of the fiscal year; and the need to rely on contracting out for relevant expertise,
which could delay the start of an investigation, if in-house capabilities are lacking.
60 527 U.S. 229 (1999).
61 Id. at 241; see id. at 231, 234, 246.
62 Id. at 242; see also United States v. Iannone, 610 F.2d 943, 945 (D.C. Cir. 1979).
63 527 U.S. at 242; see id. at 253 (Thomas, J. dissenting) (“Inspectors General, moreover, have no authority under the
Inspector General Act to punish agency employees, to take corrective action with respect to agency programs, or to
implement any reforms in agency programs that they might recommend on their own.”); see also id. at 256 (Thomas, J.
dissenting) (noting that subpoenas issued by OIGs for records, reports, audits, documents, and the like “are enforceable
by an appropriate United States district court”). Justice Thomas also states that while OIGs “do not have the statutory
authority to compel an employee’s attendance at an interview ... if an employee refuses to attend an interview
voluntarily, the Inspector General may request assistance, § 6(a)(3), and the agency head ‘shall ... furnish ...
information or assistance,’ to OIG.” 527 U.S. at 256.
64 Id. at 256, 260-61 (Thomas, J. dissenting); see also id. at 242.
Vanessa K. Burrows