Watchdog Refutes Treasury Claim Banks Cannot Be Asked to Account for Bailout Cash

PHOTO 
In a new report obtained by ABC News, the chief watchdog for the governments $700 billion bailout program refutes the Treasury Departments claim that banks cannot be asked to account for their use of taxpayer money.

The chief watchdog for the government's $700 billion bailout program refutes the Treasury Department's claim that banks cannot be asked to account for their use of taxpayer money in a new report obtained by ABC News.

The report from Neil Barofsky, the special inspector general for the Troubled Asset Relief Program (SIGTARP), will be officially released on Monday.

Starting on Feb. 5, Barofsky's office asked 360 financial and other institutions to account for their use of funds. More than 98 percent of the survey's recipients responded.

Preliminary Numbers

While the responses for each specific institution will not be released until next month, Barofsky's survey revealed the following general conclusions:

83 percent of respondents said they used some funds to increase lending or to avoid a decline in lending.

43 percent of respondents said they used some funds to maintain capital levels required by regulators to protect against future losses.

31 percent of respondents said they used some funds to invest in agency-mortgage backed securities (government-controlled Fannie Mae and Freddie Mac), which in turn supported lending and borrowing for other banks.

14 percent of respondents said they used some funds to repay outstanding loans.

4 percent of respondents said they used some funds to buy other banks.

And some respondents said they had not yet used funds due to the current economic situation, decreased demand for credit, and the brief period of time since they received the money.

Treasury: Don't Jump to Conclusions

The report, SIGTARP believes, proves that Treasury can do more to account for the use of bailout money.

"Treasury has engaged in ongoing efforts to obtain lending data from each TARP recipient, but this tells only a small part of the story," the report says.

Accordingly, Barofsky reiterates his call for Treasury Secretary Tim Geithner to require TARP recipients to submit periodic reports to the Department on their use of funds.

But it's not that easy, warns Treasury official Herb Allison.

In a July 15 letter to Barofsky responding to a draft of SIGTARP's new report, Allison writes, "We think caution should be exercised in drawing conclusions from this data. Although it might be tempting to do so, it is not possible to say that investment of TARP dollars resulted in particular loans, investments or other activities by the recipient."

Page
  • 1
  • |
  • 2
Join the Discussion
You are using an outdated version of Internet Explorer. Please click here to upgrade your browser in order to comment.
blog comments powered by Disqus
 
You Might Also Like...