Rather than using federal bailout money to reinvigorate lending to consumers, some banks that received funds from TARP have spent it on questionable items that have done little to improve the health of the country’s financial sector but have certainly helped out foreign economies such as Dubai and China.
For instance, Citigroup Inc, which received $50 billion in Troubled Asset Relief Program funds, made an $8 billion December loan, not to an American entity, but to a Dubai public sector company, according to a newly released Monday memo by Rep. Dennis Kucinich (D-OH), chairman of the House Domestic Policy Subcommittee.
The Goldman Sachs Group, which received $10 billion in TARP funds at the end of October, saw fit to spend $2 billion earlier in the year on the repurchase of company stock, which resulted in an increase in company share price.
The memo notes of that stock repurchase, “That increase would have constituted a significant benefit to top executives at Goldman Sachs, who typically own large amounts of company stock.”
As of January 3, Goldman Sachs CEO Lloyd Blankfein owned 1,995, 835 shares of the company, according to the memo.
In mid- November, Bank of America spent $7 billion investing in the China Construction Bank Corporation. Bank of America received $25 billion in TARP funds.
J.P. Morgan Treasury Services spent $1 billion investing in cash management and trade finacie solutions in India also in November. J.P Morgan Chase & Co. received $25 billion in TARP funds.
Rep. Kucinich’s office released the memo from the Subcommittee’s Democratic staff ahead of Wednesday’s hearing that will investigate Treasury Department attempts to prevent waste and abuse in the TARP program. According to a press release, the hearing will be specifically looking into the Capital Purchase Program – the largest of the five TARP programs.
The House report notes that while none of these transactions were illegal, they do not stand up well to statements made before Congress by TARP recipients on their understanding Congressional and taxpayer expectations that the TARP funding will be used to reinvigorate domestic lending.
“[A]ll of us at Bank of America understand the responsibilities that come with access to public funds,” said Ken Lewis, CEO of Bank of America, in February comments to the House Financial Services Committee. “Taxpayers want to see how we are using this money to restart the economy and-want us to manage our expenses carefully. These expectations are appropriate.”
According to the memo, “The transactions are not illegal: EESA was mostly silent on prohibited transactions, and the funds provided through CPP were made without conditions. Treasury implementing regulations and tenn agreements with CPP recipients were similarly silent. However, members of Congress might not consider them the kind of transactions they believed TARP would subsidize when they enacted EESA.”
This article has been updated because of an error in the House memo which misattributed the Goldman Sachs stock repurchase to December 16 after they had already received TARP funds. The bank made the stock repurchases on or before March 18, 2008 and on or before June 17, 2008.
Published: Monday March 9, 2009
Source: The Raw Story