Banks Won’t Say Where Bailout Money Has Gone
By Alan Stewart Carl | Related entries in Congress, Economy, MoneyDo you know where your $700 billion is? Or at least the part that’s already been handed out to financial institutions? No? Well, according to a new AP report, we may never know.
The AP contacted 21 banks that received bailout funds. Not a single one agreed to provide specific answers as to where the money is or how it’s being spent. Most say they aren’t doing any tracking. And why should they? Neither Congress nor the Treasury Department established any accounting oversight when they rushed to hand out billions in taxpayer dollars.
TARP has quickly become a faith-based initiative. We throw money at the banks and put our faith in the banks to use the funds to stimulate the economy. Because, certainly, these banks wouldn’t give huge payouts to their executives.
While I hardly want the federal government managing the ledger sheets of American banks, a little accountability regarding the bailout funds would be nice. Too bad the chicken littles who run this country were far more concerned with getting the money out rather than tracking where it went.
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December 22nd, 2008 at 11:34 am
Alan,
Have you seen any good articles (either for or against) on the effectiveness of the bailout money? The argument prior to handing out this money made by nearly all in favor was that is was needed to rescue the economy. I would think it would be difficult to answer that question if we never know what the banks did with the money.
December 22nd, 2008 at 11:38 am
So.. We’ve paid $350B into the banking system so far to rescue the economy, and my previous employer just laid off two thirds of its IT staff. How’s that recovery going?
(I know I know.. There are a lot more factors involved here and I’m massively oversimplifying the situation..)
December 22nd, 2008 at 2:13 pm
Continued lack of accountability from this administration.
December 22nd, 2008 at 3:30 pm
Well, the first big clue should have been when Paulson’s proposal was just to be handed $700B in one lump sum and the proposal explicitly forbade any chance of legislative or judicial oversight. The next big clue was when suggestions were made that restrictions be placed on how institutions receiving money could spend it (like no using bailout money for executive salaries or bonuses, or for buying out other banks and the objection was that “if there’s too many strings attached, banks won’t take the money even if they need it.”. And that was even AFTER finding out that Lehman transferred $8B out of accounts of Lehman’s European operations into accounts at the New York office just before Lehman declared bankruptcy – $2.5B of which was slated for New York employee bonuses.
December 22nd, 2008 at 9:16 pm
It gets worse than that. On CNBC a couple of weeks ago, I saw an executive of a smaller local bank tell how the TARP money was being used by one of the large financial institutions to acquire his bank. Needless to say, it was a hostile takeover, using tarp money to offer an inflated share price to entice shareholders and the board to sell.
What makes it so disgusting is that the local bank was operating responsibly and in the black making sensible loans to good local customers. The gigantor mega-bank was doing business not so good, which is why it was in need of the bailout money. So we’ve rewarded the bad and punished the good and, worse than that, enabled the bad business to consume the model that worked well, thus producing a greater evil.
I was in favor of the bailout b/c things were getting so out of control and the sky really was falling. But this ain’t what I had in mind. Why not spread a lesser amount of money around to all of those smaller local banks to get them back in the business of lending to help them compete with the big guys who screwed everything up in the first place. Simple, right? It wasn’t my idea, it was the CEO of the small local bank about to be swallowed up!
December 22nd, 2008 at 11:23 pm
[...] Donklephant reports: [...]
December 23rd, 2008 at 12:37 am
I got nothing….rarely have I been able to say “I told you so” (not necessarily to the people here, but in general) so quickly.