Advertisement
From TARP to “Bad Bank”; an Update on your $700 billion
February 5, 2009
The financial system needed help badly last fall, so Congress allocated a $700 billion life line. As the months pass, and with half of the money gone, there is still confusion about how it has been spent and where the rest will go.
Page 1
|
Page 2
The “good bank/bad bank” plan that has been discussed recently is being held up on Capitol Hill as legislators look into executive compensation, loans to distressed mortgage holders, President Obama’s stimulus plan, a separate stimulus plan offered by Senate Republicans, and a host of other factors.“It’s very frightening, the game plan is shifting from quarter to quarter,” said John Jay, senior analyst at Aite Group. “This is what TARP was to be initially, then they did an about face and started just throwing money at the banks.”
The initial TARP distribution had no accountability for how recipients would use the money and has come under fire after revelations of high compensation, lavish office decorating expenses and travel/convention junkets taken by executives of the financial institutions that received some of the first $350 billion tranche of the $700 billion in bailout money. This has led to consumers and many legislators to call for increased oversight for any more funds, leading to some changes by some of the financial institutions.
Tuesday, Citi defended its use of at least some of the TARP money, issuing its first quarterly progress report detailing the deployment of the $45 billion of capital the U.S. Treasury invested in the company. The report, which covers the fourth quarter of 2008, is titled, "What Citi is Doing to Expand the Flow of Credit, Support Homeowners and Help the U.S. Economy."
The bank said that its goals in deploying TARP capital are threefold: to help expand available credit for consumers and businesses; restore liquidity and stability to the capital markets; and support the recovery of the U.S. economy.
According to Citi, the company’s report describes the procedures the financial services firm “has established to oversee its deployment of TARP capital, as well as other efforts the company is making to help Americans remain in their homes, assist distressed borrowers and support U.S. businesses and communities.”
“Americans from all walks of life are facing real economic hardship, and Citi must do whatever we can to help them,” said Citi CEO Vikram Pandit. “Our responsibility is to put TARP capital to work quickly, prudently, and transparently to support U.S. consumers, businesses and our communities during these challenging times.”
Public outcry has also led to at least one change at Wells Fargo, as it canceled this week a four-day convention planned for Las Vegas. The bank initially defended the trip as a business retreat, but relented as the public complaints continued.
Now Congress is attempting to add to the public pressure. An amendment offered by US Representative Sue Myrick to TARP that would prevent any company that receives funds from outsourcing new customer service or call center jobs to a foreign-based company, passed by voice vote earlier this week in the House.
Page 1
|
Page 2
Care to Comment?
(Please read our comments policy first.)
Interested in more stories like this?
Tell us what topics you're interested in and we'll keep you posted. Enter your email address below.
Tell us what topics you're interested in and we'll keep you posted. Enter your email address below.
Related Resources
News
Analysis
Publications
Research
Products and Services
Advertisement
Advertisement
Comments
Comment from Mjohnston on February 5, 2009 at 11:34AM EST
Capping the compensation of executives will do nothing. It is those same executives that got us into this mess. Every one of these companies has smart and ethical leaders at lower levels that would likely be qualified to lead any one of these organizations..and would be happy to get $500k..or potentially even less. After all, there is not a single organization out there that can claim their CEO is fully responsible for their successes. Its not about one person in any successful business, its about building and maintaining a strong and intelligent team. When will we finally realize this?
Comment from Anonymous on February 5, 2009 at 11:52AM EST
I think that the caps to executive will help. First of all for those who don't like it they will move on to companies who are not recieving TARP money this will open up opportunities for those of us who are indeed qualified to replace them and be glad we are recieving a salary of 500,000 to do the job. New faces and ideas need to be injected into the banking industry, goodbye to the good old boys ( and some Girls)
Comment from Anonymous on February 5, 2009 at 12:39PM EST
To Mr/Ms Anonymous: Maybe your career path would be enhanced when you explain what "recieving" means. Most of us "good old boys and girls" spent careers resolving others mistakes in decisions inside a company and outside. We dedicated collection efforts to determining "can't pay, won't pay and will pay" with consistent results.Today, there are prediction models and when they do not work, the new faces and ideas may wish we were around.
Comment from future realist on February 5, 2009 at 12:40PM EST
Ben & Jerry's Ice Cream Co. had a policy "no one can earn more then 17 times the lowest paid person".These 2 pot heads did not care about money so when they put out a search for a CEO they ended up having to raise the janitor to $68,000.00 because the COE's for that size company make over $1mm. So once the CEO of a Major Bank that got TARP funds quits...enter Ben & Jerry, and in fact promoting from within would probably not get the talent needed, & the Bank would possibly fail while the Gov't blames us.Stockholders should decide the compensation Not the Gov't.
Comment from M Fichtner on February 6, 2009 at 6:25PM EST
I think this whole thing is a scam. These banks and credit card companies got all this money and they are still hanging onto the money or making it difficult for us to survive. American Express and Chase for one are jacking up interest rates on credit cards and lowering lines of credit with reasoning as "to many inquiries or to keep you account profitable" The only inquiries are them and they shouldn't be able to change the interest rates to fit therir needs. You never see them lowering the rates when the money is cheap!!!!! 18%-28% interest rates are unacceptable and the reason alot of people are turning to bankruptcy. You can't give people credit and then limit their ability to use it when they need it and to be able to change the rules to suit them. The government should have more faith in the American People and give them the money to bail themselves out which in turn would bail out the financial institutions and care dealers and help small and large business alike. Keep the jobs at home.Us small business people can't even get any help