Banks report using government assistance for loans
WASHINGTON -- The internal watchdog overseeing the government's financial bailout is pressing Treasury to seek more information from banks that receive taxpayer assistance, brandishing his own bank survey as evidence that such data can be obtained.
More than eight out of 10 banks responding to Special Inspector General Neil Barofsky's survey said money they received from the government had been used for loans or to avoid reduced lending.
Fewer than a third of the 360 banks surveyed said their lending levels would have been lower without money from the $700 billion Troubled Asset Relief Program. Banks also reported using the money to provide additional cushions of capital or to buy other institutions.
The law that created the bailout fund did not require banks to segregate the government's assistance or to track how it was used, though Congress' intent was to increase loans, either directly or by unclogging credit markets. But there is no process in place to make sure the money is specifically used to boost lending and there are no consequences for banks that don't use it to that end.
Treasury's top official in charge of the program minimized the significance of Barofsky's survey, saying few conclusions could be drawn from the 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," Assistant Treasury Secretary Herbert Allison wrote in response to the Barofsky's audit.
Treasury conducts its own, more limited lending survey of 21 large banks. In its latest survey, released on Wednesday, Treasury reported that outstanding loan balances were flat in May and that the banks reported modest growth in new loan originations.
Even Barofsky cautioned that in his survey banks did not quantify the amount of new lending or the incremental difference in lending attributable to the bailout funds. As a result, Barofsky said there was not enough data to obtain an aggregate amount of new lending caused by the taxpayer infusions.
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