"$78 billion Tarp windfall" for banks
The US Treasury paid banks $78 billion too much for bank stock and warrants under the Troubled Asset Relief Programme (Tarp), according to the programme's head of oversight.
Elizabeth Warren, chair of the panel, told the Senate banking committee yesterday: "Last fall, the Treasury sold the American public on the Tarp programme by claiming that it would help banks while protecting taxpayers. Secretary Paulson described the transactions as 'at or near par'-that the value of the assets the Treasury received was roughly equal to the money being spent. But that didn't happen. Treasury got less than it spent".
As of January 23, 2009, 317 financial institutions have received $194 billion, under the Treasury's Capital Purchase Program (CPP), which is designed for healthy banks, with eight large early investments for firms including Bank of America, Citigroup and JP Morgan accounting for 64% of the total. However, in these eight deals the Treasury received only $78 in bank stock and warrants for every $100 spent.
In the two deals made under the Treasury's programmes for significant institutions at particular risk, the Treasury received assets worth only $41 for every $100 spent. American International Group (AIG) received money under the Systemically Significant Failing Institutions Program (SSFI), while six weeks after receiving money under the CPP, Citigroup received a second infusion of Tarp funds as part of the Targeted Investment Program (TIP).
Warren said the Treasury had "failed to delineate a clear reason for such an overpayment" - while the overpayment, effectively a government subsidy, could have theoretically been justified by the need to keep the banks afloat, the Treasury had produced no evidence that this was in fact the case.
Warren noted that she had sent a letter to former Treasury Secretary Paulson asking for his responses on a variety of strategical and logistical issues. The Panel found the Treasury's responses to be "non responsive or incomplete", especially in relation to bank accountability, transparency and asset valuation.
See also: $20 billion in Tarp aid for Bank of America after Merrill losses
$428bn of Tarp funds to be exhausted by end of year
Tarp runs out at last
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
More on Regulation
FRTB start dates must align globally, says European Commission
Lawmaker could trigger delay to market risk rules in Europe if US implementation drags on
Fed green lights more capital relief trades
Five US banks authorised to issue repeat credit-linked notes backed by financial guarantees
Basel III endgame: why moving fast might prove better for banks
Republicans are pushing for reproposal, but a rapid finalisation may prove less far-reaching
Isda pushes to ‘decouple’ Simm calibration from model changes
Emir 3.0 prompts effort to separate risk-weight revisions from methodology updates
Basel war on window-dressing may smooth liquidity, at a price
Changes to G-Sib charge could curb year-end repo volatility, but also cut balance sheet capacity
One year on, regulators still want a cure for bank runs
Broad support for higher outflow assumptions on uninsured deposits, but that won’t save insolvent banks
Watchlist and adverse media monitoring solutions 2024: market update and vendor landscape
This Chartis report updates Watchlist monitoring solutions 2022 and focuses on solutions for sanctions (name and transaction) screening and monitoring adverse media and its related elements
Basel Committee reviewing design of liquidity ratios
Focus on LCR and NSFR after Silicon Valley Bank and Credit Suisse, but assumptions may not change
Most read
- Too soon to say good riddance to banks’ public enemy number one
- Breaking out of the cells: banks’ long goodbye to spreadsheets
- Basel III endgame: why moving fast might prove better for banks