Elizabeth Warren, who heads a congressionally appointed oversight panel, told ABC news there was no evidence the Treasury had used money from the Troubled Asset Relief Program (TARP) to support the housing market by avoiding preventable foreclosures.
"There's just no money that's gone in that direction. This one's not even arguable," she said. "The TARP funds themselves have not been used in this way despite congressional statutes requiring them to do so."
In a draft of a report to be released on Friday, the panel said the Treasury has failed to reveal its strategy for stabilizing the financial system and had done little to track how the money was used.
It cited "significant gaps in Treasury's monitoring of the use of taxpayer money," including asking financial institutions to account for what they have done with taxpayer funds.
It also questioned whether Treasury has fulfilled its obligations to Congress.
"For Treasury to take no steps to use any of this money to alleviate the foreclosure crisis raises questions about whether Treasury has complied with Congress's intent that Treasury develop a 'plan that seeks to maximize assistance for homeowners,"' the panel said in the report.
The panel said the Treasury hasn't used any of TARP's first $350 billion tranche to help borrowers refinance or deal with mortgages that have a face value that is more than the current market value of their homes.
"Treasury needs to be clear as to what, if anything, it has done, and if it insists on taking credit for private sector efforts, it must explain what 'help' means," the draft report said.
A Treasury spokesman declined to comment, saying the department had not seen a copy of the report.
"Treasury is the one who set up the system and they didn't put any tracking mechanisms on it. They didn't put any restrictions on the banks," Warren told ABC's "Good Morning America."
"So the money could be used in lots of different ways. It might be used for lending, which was supposedly the initial purpose," she added. "It might be used to buy other banks, it might be used to buy other assets, it might to buy things overseas. Or it may just be stuffed in vaults and left there."
Asked if the Treasury had been given too much discretion in the use of the funds, Warren, a Harvard law professor, said, "I think that Congress may want to take a very hard look at that question.
The Treasury must request congressional approval to access the bailout fund's second $350 billion. President-elect Barack Obama's economic team, including Treasury Secretary nominee Timothy Geithner, is working on an overhaul of the fund to speed the flow of credit to consumers and the economy.
"Ultimately, (I) don't have a badge, don't have a gun," Warren said. "It's up to Congress what they're going to do about making more requirements and how Treasury uses this money."
The TARP oversight panel had asked the Treasury to respond to 45 questions, but the department did not answer a number of them, according to the report.