|No Accounting for TARP, and What Consequence May Come.
||[Dec. 23rd, 2008|08:00 am]
Is anyone really surprised that the funds from the TARP are being used in arbitrary, ambiguous, and sometimes, a classified manner?
Banks unable to say how they're spending bailout
By MATT APUZZO
WASHINGTON — It’s something any bank would demand to know before handing out a loan: Where’s the money going?
But after receiving billions in aid from U.S. taxpayers, the nation’s largest banks say they can’t track exactly how they’re spending the money or they simply refuse to discuss it.
“We’ve lent some of it. We’ve not lent some of it. We’ve not given any accounting of, ’Here’s how we’re doing it,’” said Thomas Kelly, a spokesman for JPMorgan Chase, which received $25 billion in emergency bailout money. “We have not disclosed that to the public. We’re declining to.”
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?
None of the banks provided specific answers.
“We’re not providing dollar-in, dollar-out tracking,” said Barry Koling, a spokesman for Atlanta, Ga.-based SunTrust Banks Inc., which got $3.5 billion in taxpayer dollars.
Some banks said they simply didn’t know where the money was going.
“We manage our capital in its aggregate,” said Regions Financial Corp. spokesman Tim Deighton, who said the Birmingham, Ala.-based company is not tracking how it is spending the $3.5 billion it received as part of the financial bailout.
The answers highlight the secrecy surrounding the Troubled Assets Relief Program, which earmarked $700 billion — about the size of the Netherlands’ economy — to help rescue the financial industry. The Treasury Department has been using the money to buy stock in U.S. banks, hoping that the sudden inflow of cash will get banks to start lending money.
There has been no accounting of how banks spend that money. Lawmakers summoned bank executives to Capitol Hill last month and implored them to lend the money — not to hoard it or spend it on corporate bonuses, junkets or to buy other banks. But there is no process in place to make sure that’s happening and there are no consequences for banks who don’t comply.
“It is entirely appropriate for the American people to know how their taxpayer dollars are being spent in private industry,” said Elizabeth Warren, the top congressional watchdog overseeing the financial bailout.
But, at least for now, there’s no way for taxpayers to find that out.
Pressured by the Bush administration to approve the money quickly, Congress attached nearly no strings on the $700-billion bailout in October. And the Treasury Department, which doles out the money, never asked banks how it would be spent.
“Those are legitimate questions that should have been asked on Day One,” said Rep. Scott Garrett, R-N.J., a House Financial Services Committee member who opposed the bailout as it was rushed through Congress. “Where is the money going to go to? How is it going to be spent? When are we going to get a record on it?”
Nearly every bank AP questioned — including Citibank and Bank of America, two of the largest recipients of bailout money — responded with generic public relations statements explaining that the money was being used to strengthen balance sheets and continue making loans to ease the credit crisis.
A few banks described company-specific programs, such as JPMorgan Chase’s plan to lend $5 billion to nonprofit and health care companies next year. Richard Becker, senior vice president of Wisconsin-based Marshall & Ilsley Corp., said the $1.75 billion in bailout money allowed the bank to temporarily stop foreclosing on homes.
But no bank provided even the most basic accounting for the federal money.
“We’re choosing not to disclose that,” said Kevin Heine, spokesman for Bank of New York Mellon, which received about $3 billion.
Others said the money couldn’t be tracked. Bob Denham, a spokesman for North Carolina-based BB&T Corp., said the bailout money “doesn’t have its own bucket.” But he said taxpayer money wasn’t used in the bank’s recent purchase of a Florida insurance company. Asked how he could be sure, since the money wasn’t being tracked, Denham said the bank would have made that deal regardless.
Others, such as Morgan Stanley spokeswoman Carissa Ramirez, offered to discuss the matter with reporters on condition of anonymity. When AP refused, Ramirez sent an e-mail saying: “We are going to decline to comment on your story.”
Most banks wouldn’t say why they were keeping the details secret.
“We’re not sharing any other details. We’re just not at this time,” said Wendy Walker, a spokeswoman for Dallas-based Comerica Inc., which received $2.25 billion from the government.
Heine, the New York Mellon Corp. spokesman who said he wouldn’t share spending specifics, added: “I just would prefer if you wouldn’t say that we’re not going to discuss those details.”
The banks which came closest to answering the questions were those, such as U.S. Bancorp and Huntington Bancshares Inc., that only recently received the money and have yet to spend it. But neither provided anything more than a generic summary of how the money would be spent.
Lawmakers say they want to tighten restrictions on the remaining, yet-to-be-released $350-billion block of bailout money before more cash is handed out. Treasury Secretary Henry Paulson said the department is trying to step up its monitoring of bank spending.
“What we’ve been doing here is moving, I think, with lightning speed to put necessary programs in place, to develop them, implement them, and then we need to monitor them while we’re doing this,” Paulson said at a recent forum in New York. “So we’re building this organization as we’re going.”
Warren, the congressional watchdog appointed by Democrats, said her oversight panel will try to force the banks to say where they’ve spent the money.
“It would take a lot of nerve not to give answers,” she said.
But Warren said she’s surprised she even has to ask.
“If the appropriate restrictions were put on the money to begin with, if the appropriate transparency was in place, then we wouldn’t be in a position where you’re trying to call every recipient and get the basic information that should already be in public documents,” she said.
Garrett, the New Jersey congressman, said the nation might never get a clear answer on where hundreds of billions of dollars went.
“A year or two ago, when we talked about spending $100 million for a bridge to nowhere, that was considered a scandal,” he said.
I'd like to point out that in the fall of 2008, my opinion on what would become TARP was the same as many regular Americans. I opposed passing the 'bailout,' now known as TARP. I specifically detested the threatening and impatient demeanor President Bush parroted from Wall Street. Most people could see that TARP was a hasty construction. When it failed to initially pass, I was delighted. Then, they tacked on more to the bill to make Republicans and Democrats happy, and it passed with even more money appropriated in party-friendly concessions to add shadow debt above and beyond the $700 billion. There were things on there, like legislation of funds for NASCAR, that I had no interest in allowing. It still bothers me that the Republican and Democratic parties merely solve disagreements in this era by adding more money to their pet causes. These are not the issues with which regular Americans are concerned.
So, as I figured, the oversight of TARP is a complete failure.
Expect 3-5 times more than the initial $700 billion, as scores of companies and multiple industries will likely turn malignant in 2009. The only process I see in practice is one of a perpetual printing press. The United States can, and will, print more money (run an increasing national debt) and devote that money to keeping its economy from crashing under the exponential increase of red balances in the private sector. They're trying to solve the tremendous failure of the financial sector with money created magically by the Treasury, buying private banks ... possibly making finance 100% government controlled by the end of this movement. The government also appears to be using this magic money to erase debt in a clandestine book-cooking, from the looks of some companies who are completely avoiding disclosure. What the US government apparently is trying ... could they be trying to quietly hit a magic reset button?
This magic money apparently is the responsibility of the taxpayers to repay. Wait ... they're magically making money to burn, backed by the word of the government that it is good for repayment of debt ... but that word is dependent upon an increasingly-impoverished population base to shoulder for real re-payment? As if billions of Americans weren't lured into this massive problem through exploited loopholes during this long de-regulated period in the financial industry? Does anyone think that foreign creditors will fail to notice the cheating? Will this spurn foreign creditors into demanding swifter payment? Is all of this what it appears to me to be?
I raise even more related questions. What of the homeowners who can't pay their mortgages? What of the others who can pay their mortgages but are infuriated by those that can't? How is it that many will still lose their homes, but in 2-3 years, the financial companies will possibly report a stunning health and miraculous turnaround? Will they report it on the backs of the recently trampled? What if we help those people, but those that can pay their mortgages choose instead to obtain new properties, while letting the old properties with higher rates of mortgage lapse into foreclosure? Essentially, what could be done to curb dissent, or reform existing mortgages, in order to avoid comparative unfairness in payment terms? Surely, the problem of one guy paying on a mortgage while the neighbor gets the government to pay for his mortgage ... that's still a problem that hasn't been solved, in terms of the division among mortgage holders.
We aren't even beginning to open up credit as we've known it. The credit freeze increased the velocity of failure in the US automotive industry. They're a symbol of what will happen to other companies and individuals, in terms of needing loans. In the next couple years, it's going to be really difficult to open up a whole new line of credit. Such credit, even from legitimate applicants, simply won't be made available. Increased numbers of people who have the need and can pay ... won't be afforded. What will strict regulations of credit card business in 2010 do to future applicants, both individual and corporate? How will that affect the overall loan market? If you suddenly tighten up regulation, wouldn't it stand to reason that companies will reverberate with backlash of tightened loan qualifications, thus denying too many reasonable applicants ... continuing the freeze of credit ... indefinitely?
People might wonder why I support aid to US Auto, based on the information that I opposed the passage of TARP. While I opposed TARP, I seem to contradict myself when I support US Auto bridge loan. This is incorrect. If it's not clear, let me spell it out for you. I'm most concerned with common-level jobs. The key to my opposition is not the appropriation of taxpayers' funds ... it's how those funds are spent, and to whom those funds are afforded. TARP for Wall Street turned out exactly as it looked like it was going to happen ... money shoved under bank carpets, nobody knows, nobody can say, nobody being helped, but the checks to banks were definitely cashed. The US financial sector is still on fire. None of that $700 billion appropriated to US Finance was intended to keep bank tellers or low-level employees at their jobs. It seems to be intended to keep private financiers from throwing a nation-crippling tantrum. Some wealthy people got burnt by this crisis. This TARP is their blackmail.
In comparison, such gross negligence in oversight obviously will not to happen for the US automotive companies. Also, GM and Chrysler were not bluffing when they said their doors were about to close. Those companies were running into immediate ends. There were millions of jobs that were about to evaporate due to broke entities. Contrary to popular Southern Republican belief, those people would stay jobless, and it would cripple their own state economy in a wave. Didn't anyone notice how a natural disaster, Katrina, ruined Louisiana and the surrounding and related states, not only in infrastructure, but also in rampant population decline, crime, relocation, debts, price increases, and crippled economy? US Auto failure was an economic disaster of similar proportion.
The key similarity may be that neither the finance sector nor the automotive sector can survive without more transfusions from this magic green blood bank of the US Treasury. However, I don't see a choice. I now support TARP and the US Auto bridge loan portion of TARP because when you save these derelict institutions, you're saving millions of regular people from going jobless all at once. You're essentially keeping everyone, both the guilty and the innocent, from chaos. You don't want a 6.7% national unemployment to jump to 10% overnight. Anything more than 15 percent, and you have to consider the sudden power and freedom massed from millions of people with nothing to lose. There was no revolution in America in the 1930s, but the Great Depression blew through the world with various consequence, and some nations, such as Germany, reacted violently. You cannot suffer millions of people through extended years of poverty without likelihood of an extremist response. Such are the times when revolutions mount against governments. Such are also times when dictators rise to power. President Bush conducted irresponsible leadership, but he did not become the monstrous dictator some predicted he would be. Bush's legacy of legislative dismissiveness, judicial tampering, and executive irreverence is only a blueprint for a future American leader to exploit. I hope that President-elect Obama would seek to close abuses set in motion from the previous leader. I hope that Obama does not seek to further exploit those loopholes.