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July 19, 2009
TARP Inspector General wants Treasury to track bank use of funds
You gave US banks more than $200 billion to pull their chestnuts out of the fire with the TARP program. But what did they do with that cash?
Inspector General of the TARP program Neil Borofsky thinks that Treasury Secretary Timothy Geithner isn't doing a good enough job in trying to find out according to this story by Rebecca Christie in Bloomberg:
Barofsky's survey collected information from 360 banks that have received TARP capital, including Bank of America Corp., JPMorgan Chase & Co. and Wells Fargo & Co. The responses, which the inspector general said it didn't verify independently, showed that 83 percent of banks used TARP money for lending, while 43 percent used funds to add to their capital cushion and 31 percent made new investments.
Existing Treasury surveys of TARP banks' lending don't show enough about what the banks are up to, said the report by the independent inspector general, which is scheduled for public release tomorrow.
The Treasury's approach "fails to recognize that TARP recipients do far more with their TARP funds than simply originating loans: They have also used these funds in a broader array of interrelated activities, as demonstrated in this audit, such as making investments, acquiring other financial institutions and simply maintaining the capital as a cushion against future losses," the report said.
The Treasury questioned whether the report's findings had broad implications for overseeing the TARP program, in an official response to the report that noted most banks don't manage their TARP money separately from other funds.
Borofsky has already butted heads with the political appointees at Treasury for looking too closely at the program. This latest attempt to get some accountability from Treasury regarding TARP would appear to put him on a collision course with Geithner again.
This bears watching over the next week.