(10/5/2011) - The Obama Administration says taxpayers are recouping the
full $245 billion in bank bailout money from the government, as well as a
hefty $20 billion profit, but regulators rolled over on payback terms.
"Exiting
TARP: Repayment by the Largest Financial Institutions" prepared
by the U.S. Treasury's Special Inspector General for the Troubled Asset
Relief Program (SIGTARP) focused on the sales of stock to raise capital for
bailout repayments by four major banks: $45 billion each from Bank of
America and Citigroup; $25 billion from Wells Fargo; and $7.6 billion from
PNC Financial Services Group.
The payback terms required banks to issue a minimum of $1 in new common
stock for every $2 in bailout money repaid.
Banks instead used cheaper and faster alternatives, including selling
assets or issuing preferred stock, the report found.
Banks wanted to quickly exit TARP because it restricted executive bonus programs and created a
stigma associated with federal bailout money, according to the report.
When banks repaid the government in December 2009, only Citigroup fully
met the 1-for-2 requirement, the report said.
The regulatory agencies that originally negotiated repayment terms were
the Federal Reserve, the Federal Deposit Insurance Corp. (FDIC) and the Treasury
Department's Office of the Comptroller of the Currency (OCC), but may have
bowed to bank pressure.
The critical report said the Treasury agreed to speed up repayment, even
if it meant the repayment goal was put ahead of making certain banks had
recovered sufficiently to exit TARP without problems.
Banks have been shaky lately, with share prices falling due to worries
over exposure to European debt and bank issues. They've also been doing an
end run around new regulations that have forced more disclosures and caps on
some credit card interest rates and other fees.
Banks are moving away from free-checking and socking it to consumers with higher debit
card fees and charges, fee-loaded secured credit cards, tighter underwriting rules and
other money-making measures.
The report said regulators not only ignored repayment requirements on
bailout money, they also used ad hoc and inconsistent methods.
Regulatory shortcomings were one of the major causes of the housing crash
and the subsequent greatest recession
since the Great Depression, according to the Financial Crisis
Inquiry Commission.
The Fed, the OCC said in written statements they are satisfied with the
payback and the joint regulatory decision on the speed up. The OCC disagreed
with the charge that the bank review process was inconsistent and said
deviating from the original plan resulted in positive results.
The banks said repaying the bailout quickly benefited taxpayers and
allowed banks to fully get back to the business of banking.
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