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Two previous articles, The Banker's Dilemma and The Banker's Choice, have discussed the choices banks would make regarding the use of TARP funds. It was suggested that the choice would be predominantly to build bank reserves and make investments, rather than build loan portfolios.
Further investigative reporting by others has added some more information. The newsletter Money Morning has reported:
In its latest investigative offering, The Associated Press contacted 21 banks that received at least $1 billion in government money and asked four questions: How much has been spent? What was it spent on? How much is being held in savings? And what’s the plan for the rest?
According to The AP, none of the banks provided specific answers.
For instance, when Kevin Heine, a spokesman for Bank of New York Mellon Corp. (BK) - which received about $3 billion in TARP money - was asked how his institution was using the emergency infusion, he replied by stating that "we have not disclosed that to the public. We’re declining to."
The words varied, but the basic message was the same from one bank to another. For instance, Barry Koling, a spokesman for SunTrust Banks Inc. (STI), the Atlanta, Ga.-based lender that received $3.5-billion in taxpayer cash, told the wire service that "we’re not providing dollar-in, dollar-out tracking."
Some banks actually admitted that they simply didn’t know where the money was going.
For instance, a spokesman for the Birmingham-based Regions Financial Corp. (RF) said the company is not tracking how it is spending the $3.5 billion in TARP money that it received.
"We manage our capital in its aggregate," said Regions spokesman Tim Deighton.
These answers - or lack thereof - highlight both the secrecy surrounding the TARP program, as well as the lack of oversight by Congress. Given that the entire TARP program is worth at least $700 billion - roughly the equivalent of the economy of The Netherlands - those aren’t small issues.
So, what has happened is that “our money” (TARP) has become “their money” (the banks) and the only thing we know, in large part, is the amount that each bank has received. Except by a process of “connecting the dots” (The Banker: Connecting the Dots) we are unable to get any information about how the TARP money is being spent. With the AP connecting the dots we may get some more information in the future. They certainly have more investigative resources than I do.
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This article has 19 comments:
The FDIC has over 120 banks on it's watch list. Remember IndyMac was never on their watch list. So rather than admit the banking system was failing to the public and casue a panic the Fed and the Tresuary came up with TARP. Why else would they give complete control to Paulson? Why else would there be so little acounting of the use of the funds? I don't really like it myself but there was little choice in the matter. By the way, things are only going to get worse for banks as the recession takes hold and their commercial loans start to go belly up.
Me: I'm coming
They: we don't want you
Me: I'm coming
They: we don't need you, we got everything
Me: your statistics are all screwed, no evidence ...
They: We got everything in control, US is top Quality
Automotive: Also no clue
Please see this one for any trust in anything someone tells you.
www.youtube.com/watch?...
> jack
One could argue that the TARP was a defacto looting of the treasury. Could the reason for such secrecy surrounding all the TARPing by everyone involved be to disguise and deny the possibility that they are, in fact, simply looting the treasury when they saw an opportunity to do so?
Could this imply the end of the American empire is close at hand?
Trillion dollar deficits on top of trillion dollar debt can't continue forever. Eventually something has to give and we will see what happens when the debt based house of cards falls in on itself.
"The important thing that taxpayers should understand is that it is a capital infusion treated like preferred stock with a 5% dividend to the government with the requirement to pay it back within 5 years or pay substantially larger interest and fees." - dergman98
That's what they keep saying, but what happens if they CAN'T pay it back within those 5 years? Will piling on additional fees or penalties make it more likely that TARP money will be recovered? If not, what then? Do we simply tack another couple trillion onto the national debt and go have a beer?
I, for one, do not assume that statements claiming the money will be paid back with interest are equivalent to actually paying the money back with interest. It would seem prudent to consider the ramifications of the money not being paid back as well. What if the banks are still insolvent 5 years from now, for whatever reason?
After all, just days before Freddie and Fannie were nationalized the gub'mint officials responsible for monitoring them were claiming that they were in fine fiscal shape.
no one is certain where a gov't slush fund went or why it went or where it is now.
what is strange about this? it's gov't at its best.
it was a wad of money, under the control/discretion of POLS, with no controls, no measurement on effect, passed by legislators without due diligence. has this ever happened before? why are we surprised? where was all the clamor/uproar/public concern at the "point of sale"? did anyone care then? did we not get into this economic mess leading to TARP following the same lack of citizen concern/involvement?
i recall a certain republican senator from alabama giving warning. he was sent to the "showers"[sports term] by his own leadership at the time for "standing in the way of action".
we bought the goods as packaged/offered[CAVEA... EMPTOR!]. we also just reelected most of those "fine" legislators that provided this product.
How do they know that? The simple fact is they don't. Do I believe Paulson and the Treasury knows that. In fact, I believe they know one thing, that is a lie. Citibank is maybe $1 trillion underwater. If you wish to prove me wrong show me their positions. They won't because they can't without 1) bankrupting themselves 2) Making Paulson look like a crook or idiot 3) and maybe someone going to jail.
This recession is not a natural disaster. It is caused by fraud, lies, deceit, lack of regulation, and unaccountability on such a grand scale that it undermined the strongest country in the world. Enough said.
As I recall the original go-round resulted in the TARP being defeated in the House as a result of an avalanche of constituent feedback that one House member described as "50% No, and 50% Hell No".
As we all remember, this resulted in the failure to pass the House for the initial TARP. The Senate then pulled a fast one and doctored an unrelated financing bill, replacing all the original language with the TARP language and adding in the $150 billion of extra pork to buy votes in the House. (The Senate had to do that as funding bills must orginate in the House and the TARP had failed there, so an unrelated funding bill was "cut 'n pasted with TARP II to skirt the rules.)
Naturally, TARP II passed the House.
One could argue that TARP I would have passed the house if not for the vociferous response from the public and the fact that elections were only weeks away. If not, it wouldn't be surprising to most if TARP I had passed despite the public's reactions.
fran is right and wrong. The public 'let' these things happen, but not without trying to stop it at the point of attack. The system has become so broken that the 'will of the people' is merely a platitude used to secure re-election. After that, it becomes a vote for sale circus with the high bidder getting legislative support at the expense of the taxpayer.
On Jan 07 08:25 AM dergman98 wrote:
> The important thing that taxpayers should understand is that it is
> a capital infusion treated like preferred stock with a 5% dividend
> to the government with the requirement to pay it back within 5 years
> or pay substantially larger interest and fees. It is essentially
> a lifeline to participating banks to support their capital position
> and better enable them to make profitable loans going forward.
Thanks for commenting. Two items:
1. BK had $98 billion cash and cash equivalents as of 9/30/2008. Maybe you have more recent numbers?
2. BK was not alone in being "forced" to take TARP funds. Several other banks also maintained they didn't need the money, including Bank of America (who may have lied or had their heads in the sand). Many believe the rational for these forced payouts was that it provided cover for those who deperately needed TARP, like Citibank. The argument was that if only the needy were exposed to TARP, short runs on their stock could bring them down. This observation relates to constructe's comment.
did we FOOLS elect the same CULPRITS? YES
have we been electing the same CULPRITS every two years? YES
is any one in congress under attack beyond the the man from ill.?[Obama replacement] NO
record is clear. we really don't care!
On Jan 07 12:28 PM Smarty_Pants wrote:
> "it was a wad of money, under the control/discretion of POLS, with
> no controls, no measurement on effect, passed by legislators without
> due diligence. has this ever happened before? why are we surprised?
> where was all the clamor/uproar/public concern at the "point of sale"?
> did anyone care then?" - fran
>
> As I recall the original go-round resulted in the TARP being defeated
> in the House as a result of an avalanche of constituent feedback
> that one House member described as "50% No, and 50% Hell No". <br/>
>
> As we all remember, this resulted in the failure to pass the House
> for the initial TARP. The Senate then pulled a fast one and doctored
> an unrelated financing bill, replacing all the original language
> with the TARP language and adding in the $150 billion of extra pork
> to buy votes in the House. (The Senate had to do that as funding
> bills must orginate in the House and the TARP had failed there, so
> an unrelated funding bill was "cut 'n pasted with TARP II to skirt
> the rules.)
>
> Naturally, TARP II passed the House.
>
> One could argue that TARP I would have passed the house if not for
> the vociferous response from the public and the fact that elections
> were only weeks away. If not, it wouldn't be surprising to most if
> TARP I had passed despite the public's reactions.
>
> fran is right and wrong. The public 'let' these things happen, but
> not without trying to stop it at the point of attack. The system
> has become so broken that the 'will of the people' is merely a platitude
> used to secure re-election. After that, it becomes a vote for sale
> circus with the high bidder getting legislative support at the expense
> of the taxpayer.
we, as a nation, either put people in office which will create a transparent environment - or just resign yourselves to the status quo.
it really is the people's choice.
On Jan 07 09:11 AM john s. gordon wrote:
> dergman - banks hoarding cash, not making loans to qualified borrowers,
> they did this in the credit crunch of 1989, result was creation of
> a loan brokerage industry connecting people with cash to business
> firms who needed it, disintermediating the banks. situation gradually
> straightened itself out/
Perhaps you want to reconsider your comment.
BAC needed more than $138B in government money and backing one week after you said they would never need any help. The banks are insolvent and only the government is keeping them ouy of full receivership.