Treasury provides $394.9M from bailout to 28 banks
WASHINGTON -- The Treasury Department announced Tuesday it has provided $394.9 million to 28 banks in new payments from the government's $700 billion financial rescue fund.
The government is buying preferred stock in banks as a way to bolster their balance sheets in the hopes of getting them to resume more normal lending. The new payments bring the total to $196.76 billion, covering 467 financial institutions in 47 states and Puerto Rico.
The largest single payment in the new round was about $83.6 million to Integra Bank of Evansville, Ind., followed by $56 million to the Lakeland Financial of Warsaw, Ind.
The smallest payment in the new round was $541,000 to Victory Bank of Limerick, Pa.
The part of the bailout program that is purchasing preferred stock in banks is expected to cover $250 billion of the first $350 billion of the rescue fund. Congress authorized President Barack Obama's administration to use the second $350 billion of the fund, and the administration last month laid out a revised plan on how that money will be spent.
The overhaul is requiring 19 of the nation's largest banks to undergo stress tests to see whether they would need additional support to withstand an even more severe economic downturn. The Obama administration has not specified how much of the second half of the bailout fund will be used for bank stock purchases, but has said it will use a portion of the second $350 billion to set up a government-private sector partnership to buy banks' bad assets.
The revamped program seeks to address the complaints lodged by many in Congress over how the Bush administration and then-Treasury Secretary Henry Paulson ran the rescue program. Critics charged that the taxpayer money was being distributed to the banks with few restrictions on how the money would be used and as a result, the first half of the fund failed to accomplish the primary goal of boosting lending.
In the budget outline sent to Congress last week, the administration raised the possibility that it could request up to another $750 billion in rescue support.
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