Two months after Treasury Secretary Henry Paulson expended practically every last penny of the Bush administration's political capital to pass the Troubled Asset Relief Program (TARP) and the Treasury Department itself has spent a quarter of a trillion taxpayer dollars on TARP transactions, the entire undertaking seems to have had little to no affect on the macro-economy... and has raised more questions than it has resolved.

The banking sector is buffeted weekly by reports of some venerable financial institution brought to its knees, its market capitalization all but evaporated. Hundred of billions of TARP dollars have been spent on re-capitalization, with no sustained improvement in the credit markets. Implementation of the TARP oversight process has been delayed to the point where statutory reporting deadlines are being missed. The legally-mandated public accounting of TARP transactions conflicts with private and nonprofit accounts and redactions in contract disclosures are far from a model of transparency. For better or worse, not a cent has been spent on the purchase of a troubled asset of a single bank.

All the while, trillions of dollars of national wealth have vanished in the process, devastating retirement accounts and home values. The credit crisis continues virtually unabated, undermining the ability of people to get car and student loans and even keep living in their homes -- and of businesses to make payroll and even retain workforces.

What follows is a review of some of the main problems with implementation of the TARP program in the areas of transparency, oversight, and transactional integrity - problems that threaten to impair its viability and efficacy.

Transparency: Transparency in TARP implementation has been less than ideal on a number of fronts. To date, Treasury has disbursed about $290 billion under TARP to purchase preferred stock. Since dollars are fungible, it is exceedingly difficult to determine whether a financial institution receiving a capital infusion under TARP is complying with the terms under which is has received it. And it becomes impossible, especially when those terms are not known, to determine whether a dollar spent by a bank receiving capital under TARP on employee bonuses or on dividends is in violation of the TARP.

In order to decide which transactions to undertake and how to execute them, Treasury has retained a bevy of large law and accounting firms and an army of financial advisory firms. Details relating to the nature of the work performed by these firms and their compensation, all arguably public information, is almost impossible to undercover. Various items in publicly accessible contracts have been redacted. Treasury has said it will make all this information public, but it has not said when.

Since roughly two-thirds of the resources authorized for TARP are yet to be deployed, substantial outside professional assistance will necessarily continue. Without public information regarding contracts with firms retained, bidding for this work is blind and Treasury will likely overpay, to the extent that the work is appropriately bid out. Compliance with TARP's requirement that Treasury develop and implement standards and procedures regarding the inclusion of minorities and women in contracting remains all but unverifiable.

Oversight: The statute authorizing the TARP program mandates the establishment of the following oversight entities and review programs:

• Congressional Oversight Panel
• Financial Stability Oversight Board
• Comptroller General Program Review
• Special Inspector General
• Office and Management and Budget Cost Review

Of these, the only implementation has been the establishment of the Financial Stability Oversight Board within Treasury. The Board has met three times but has made no findings or decisions, making it difficult to assess the effectiveness of its oversight to date. The Congressional Oversight Panel members were named only last week. The President's nominee to serve as Special Inspector General may not be confirmed by the Senate this calendar year.

Transactional Integrity: Violations of the TARP law of the sort cited above relating to executive compensation, or dividends policy, run the risk of vitiating the program's effectiveness by diverting TARP resources to uses that do not improve the recipient institution's liquidity or ability to lend. But even more damaging are resource diversions explicitly enjoined. The law, for example, prohibits executive compensation packages that threaten the value of the financial institution while Treasury holds a debt or equity interest in it.

This September, South Financial Corp., South Carolina's largest bank, approved an $18 million severance package for its founding CEO upon his retirement in December. On Oct. 24 the bank announced that it would apply for TARP funds. A week later, the CEO retired, two months earlier than expected. Last week, South Financial Corp. received $374 million under TARP. In this instance, even a technical violation did not occur, the TARP transaction's integrity, if not its efficacy, has been compromised.

An ever harder-to-assess transactional integrity question arises from asset valuation vagaries and the taxpayer protection principle enshrined in TARP. For instance, under the terms of yesterday's Citigroup transaction, taxpayers will receive up to $2.7 billion in warrants. But the warrants are valued at $10.61 per share - almost three times the company's stock price.

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The problems cited above pale in comparison with the larger question of whether TARP has begun to or will ultimately succeed in restoring the nation's credit market and, eventually, the macro-economy. But they have a major impact on the program's chances of succeeding. If the public perceives inadequate transparency, oversight, and integrity in TARP implementation, Congress will be hard-pressed to approve the second $350 billion TARP tranche and it may pull the plug on the program entirely before it has had a chance to succeed.