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01-13-2009, 10:42 PM
WASHINGTON – Under criticism for its oversight of the federal bailout program, the Treasury Department plans to examine more closely whether institutions that receive money use it to boost lending.
Neel Kashkari, assistant Treasury secretary in charge of the bailout program, said Tuesday that the department will compare the level of lending by banks that have received government money with lending levels by similar banks that haven't gotten assistance.
The Bush administration has been strongly criticized by lawmakers from both parties for not doing more to track the roughly $180 billion invested so far in more than 250 banks in an effort to increase consumer credit and lending to businesses.
A congressional oversight panel set up to monitor the financial assistance program said last week that "direct measurements" of what individual company recipients have done are necessary to determine whether the program is benefiting the public.
A spokesman for the panel declined to comment on Kashkari's remarks.
Kashkari said the government will use regular quarterly reports on lending that banks already submit and also will collect monthly data from the largest banks that have received government money. The department hopes to begin gathering the data by the end of this month and to publish the results several weeks later, he said.
The Associated Press last month asked 21 banks that received more than $1 billion from the program to describe what has been done with the money. None would provide any specifics.
Kashkari said Tuesday he would remain at his post for several weeks after President-elect Barack Obama is inaugurated Jan. 20, to assist with the transition.
Kashkari's remarks reflect growing pressure on the financial industry to provide more accounting for how the funds are being used. The Federal Deposit Insurance Corp. on Monday called on the banks it regulates to document how they are using the government funds to boost "prudent lending" and help at-risk borrowers avoid losing their homes to foreclosure.
Kashkari said banks might use the money to shore up their balance sheets in addition to lending, particularly if they are forced to write down the value of loans they carry on the books. Last year, major financial institutions such as Citigroup Inc., Merrill Lynch & Co. Inc. and Morgan Stanley booked billions of dollars of losses after mortgage-related securities they owned plunged in value.
While the Obama administration has said the financial rescue fund should be used to assist homeowners facing foreclosure and small businesses, Kashkari said the program "should be focused on the financial system."
"There is a huge demand" from banks for capital injections, he said. "The number of applications under review at the regulators is in the thousands ... and hundreds more have already been preapproved by Treasury."
One option under consideration would be to provide capital only to banks that have raised a similar amount from the private markets, Kashkari said. That would give the markets a role in determining which banks are worthy of receiving more money, he said.
The Treasury Department, meanwhile, said Tuesday that it has made $14.8 billion in new investments in 43 banks. That brings its total investments to $192 billion in 257 financial institutions.
The biggest transaction was $10 billion provided to Bank of America Corp. Those funds originally were slated for Merrill Lynch but went to Charlotte, N.C.-based Bank of America after its purchase of Merrill closed Jan. 1.
The department also invested $3.39 billion in credit card issuer American Express Co., which first announced the transaction last month.
Other large beneficiaries were New York Private Bank & Trust Corp., which received $267.3 million, and FirstMerit Corp. in Akron, Ohio, which received $125 million.
The Treasury Department also has opened the program to about 3,000 small community banks that weren't previously eligible to participate, Kashkari said.
President George W. Bush, acting at the behest of Obama, on Monday asked Congress to release the second $350 billion of the rescue fund, known as the Troubled Asset Relief Program, or TARP.
Larry Summers, Obama's choice for National Economic Council director, sought to reassure lawmakers in a letter Monday that the new president will impose tougher restrictions and oversight on how the money is spent.
"The president-elect has directed his Treasury Department to monitor, measure and track what is happening to lending by recipients of our financial rescue assistance," Summers wrote in his letter.
The current administration already has committed more than the initial $350 billion of the rescue fund, using it to inject capital into banks with few strings attached and to bail out ailing financial companies considered too big to fail without further damage to the economy.
A $6 billion assistance package last month for General Motors Corp.'s financing arm, GMAC LLC, pushed Treasury's total commitments to nearly $355 billion and was possible only because a large amount of the committed money hasn't yet been spent.
Link (http://news.yahoo.com/s/ap/20090113/ap_on_bi_ge/meltdown_kashkari)
Neel Kashkari, assistant Treasury secretary in charge of the bailout program, said Tuesday that the department will compare the level of lending by banks that have received government money with lending levels by similar banks that haven't gotten assistance.
The Bush administration has been strongly criticized by lawmakers from both parties for not doing more to track the roughly $180 billion invested so far in more than 250 banks in an effort to increase consumer credit and lending to businesses.
A congressional oversight panel set up to monitor the financial assistance program said last week that "direct measurements" of what individual company recipients have done are necessary to determine whether the program is benefiting the public.
A spokesman for the panel declined to comment on Kashkari's remarks.
Kashkari said the government will use regular quarterly reports on lending that banks already submit and also will collect monthly data from the largest banks that have received government money. The department hopes to begin gathering the data by the end of this month and to publish the results several weeks later, he said.
The Associated Press last month asked 21 banks that received more than $1 billion from the program to describe what has been done with the money. None would provide any specifics.
Kashkari said Tuesday he would remain at his post for several weeks after President-elect Barack Obama is inaugurated Jan. 20, to assist with the transition.
Kashkari's remarks reflect growing pressure on the financial industry to provide more accounting for how the funds are being used. The Federal Deposit Insurance Corp. on Monday called on the banks it regulates to document how they are using the government funds to boost "prudent lending" and help at-risk borrowers avoid losing their homes to foreclosure.
Kashkari said banks might use the money to shore up their balance sheets in addition to lending, particularly if they are forced to write down the value of loans they carry on the books. Last year, major financial institutions such as Citigroup Inc., Merrill Lynch & Co. Inc. and Morgan Stanley booked billions of dollars of losses after mortgage-related securities they owned plunged in value.
While the Obama administration has said the financial rescue fund should be used to assist homeowners facing foreclosure and small businesses, Kashkari said the program "should be focused on the financial system."
"There is a huge demand" from banks for capital injections, he said. "The number of applications under review at the regulators is in the thousands ... and hundreds more have already been preapproved by Treasury."
One option under consideration would be to provide capital only to banks that have raised a similar amount from the private markets, Kashkari said. That would give the markets a role in determining which banks are worthy of receiving more money, he said.
The Treasury Department, meanwhile, said Tuesday that it has made $14.8 billion in new investments in 43 banks. That brings its total investments to $192 billion in 257 financial institutions.
The biggest transaction was $10 billion provided to Bank of America Corp. Those funds originally were slated for Merrill Lynch but went to Charlotte, N.C.-based Bank of America after its purchase of Merrill closed Jan. 1.
The department also invested $3.39 billion in credit card issuer American Express Co., which first announced the transaction last month.
Other large beneficiaries were New York Private Bank & Trust Corp., which received $267.3 million, and FirstMerit Corp. in Akron, Ohio, which received $125 million.
The Treasury Department also has opened the program to about 3,000 small community banks that weren't previously eligible to participate, Kashkari said.
President George W. Bush, acting at the behest of Obama, on Monday asked Congress to release the second $350 billion of the rescue fund, known as the Troubled Asset Relief Program, or TARP.
Larry Summers, Obama's choice for National Economic Council director, sought to reassure lawmakers in a letter Monday that the new president will impose tougher restrictions and oversight on how the money is spent.
"The president-elect has directed his Treasury Department to monitor, measure and track what is happening to lending by recipients of our financial rescue assistance," Summers wrote in his letter.
The current administration already has committed more than the initial $350 billion of the rescue fund, using it to inject capital into banks with few strings attached and to bail out ailing financial companies considered too big to fail without further damage to the economy.
A $6 billion assistance package last month for General Motors Corp.'s financing arm, GMAC LLC, pushed Treasury's total commitments to nearly $355 billion and was possible only because a large amount of the committed money hasn't yet been spent.
Link (http://news.yahoo.com/s/ap/20090113/ap_on_bi_ge/meltdown_kashkari)