Bailout watchdog gets OK in Senate

Neil M. Barofsky earned Senate approval as the special inspector general for the Troubled Asset Relief Program. (Alex Wong/Getty images)

On the same day the Senate confirmed a watchdog for the $700 billion Wall Street rescue program, the Treasury Department said all but $15 billion of the first $350 billion has been spent.

The Senate yesterday confirmed Neil M. Barofsky, a New York prosecutor, as special inspector general within the Treasury Department. Barofsky will audit and investigate spending by the so-called Troubled Asset Relief Program that set up two months ago to bail out the nation's financial sector.

President Bush nominated Barofsky to the position last month. But his confirmation had been held up anonymously by one senator. The opposition was lifted last week. The Senate approved his nomination by unanimous agreement.

In a report to Congess yesterday, the Treasury Department said $335 billion has been allocated from the first half of the $700 billion program, which was enacted on Oct. 3.

Of the $335 billion spoken for, $250 billion has been pledged for capital infusions to banks. In return, the government receives partial ownership stakes in the financial institutions.

Another $40 billion was provided to help bail out insurance giant American International Group, and an additional $25 billion was part of a rescue package for Citigroup Inc.

Separately, $20 billion was provided to the Federal Reserve for credit protection as part of a new program to boost the availability of consumer loans.

Even as the government prods banks to use the capital injections to step up lending, it is crucial that banks act responsibly, a top Fed official said.

"We want banks to be willing to deploy capital and liquidity, but they must do so in a responsible way that avoids past mistakes and does not create new ones," Donald Kohn, vice chairman of the Federal Reserve, said in a speech.