Treasury Dept Allocates 278 Billion - Where Did It Go?

ProPublica, an independent non-profit newsroom that works in the public interest reports that 278 billion dollars were allocated to 282 banks. Their report is at the following website http://www.propublica.org/feature/bailout-bucks-to-banks-1028 ). However, we still don’t know how these funds are being used or if they are being used appropriately to restore liquidity to the financial markets and stem the tide of home foreclosures

The Treasury Dept is using the US supervisory CAMELS ratings to help it decide which of the nation’s 8.500 banks will receive bank equity investments from the TARP funds authorized by the Emergency Economic Stabilization Act (EESA) and which banks will not. The acronym CAMELS represents the components of a bank’s condition that are assessed prior to categorizing the banks on a scale from 1 -5 where 1 means the Treasury will most likely make an equity investment in your bank and 5 means it most likely wont.

• (C) Capital adequacy,
• (A) Asset Quality,
• (M) Management,
• (E) Earnings,
• (L) Liquidity, and
• (S) Sensitivity to market risk.

The New York Times states: “The criteria being used to choose who get money appears to be setting the stage for consolidation in the industry by favoring those most likely to survive” because the criteria appear to favor financially best off banks and banks too big to let fail. Alternatively, the banks that are at risk and not likely to receive an equity investment are likely to fail.

Some banks received equity investments under the understanding the banks would try to find a merger partner. Allegedly banks that receive equity investments are also “required to provide a specific business plan for the next two or three years and explain how they plan to deploy the capital. If this is the policy of the Treasury there is no apparent evidence that this is the practice. Consequently, the lack of plans and measures of effectiveness has created a lack of transparency, timely reporting, and accountability.

We deserve better and we need to hold members of the Treasury Dept. to a higher standard of performance if the public at large is going to see any benefit from these investments.