Tuesday, July 21, 2009
Neil Barofsky
When the federal government created the bank bailout program last year, the objective was not only to stabilize institutions, but also to thaw the freeze on lending to individuals and businesses that occurred during the financial crisis. And while most banks have used some bailout funds to expand their lending, many have also diverted funds for other purposes, including buying other banks.
According to the special inspector general overseeing the Troubled Asset Relief Program (TARP), almost a third of banks surveyed had spent some of their TARP monies on investments. Fifty two banks (out of 360) had repaid debts, and 15 used funds to buy other banks. Sixty banks reported not using any of their relief funds to support new lending.
Special inspector general Neil Barofsky has called for the Department of the Treasury to require more detailed and timely reporting by banks to track how they are using TARP funds. But Treasury officials so far are balking at the idea, arguing the exact use of the bailout aid cannot be tracked because, as described by The Washington Post, money given to a bank is like water poured into an ocean.
-Noel Brinkerhoff
Bailout Overseer Says Banks Misused TARP Funds (by Binyamin Appelbaum, Washington Post)
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