Bailout Overseer Says Banks Misused TARP Funds

By Binyamin Appelbaum
Washington Post Staff Writer
Monday, July 20, 2009
Many of the banks that got federal aid to support increased lending have instead used some of the money to make investments, repay debts or buy other banks, according to a new report from the special inspector general overseeing the government's financial rescue program.
The report, which will be published Monday, surveyed 360 banks that got money through the end of January and found that 110 had invested at least some of it, that 52 had repaid debts and that 15 had used funds to buy other banks.
Roughly 80 percent of respondents, or 300 banks, also said at least some of the money had supported new lending.
The report by special inspector general Neil Barofsky calls on the Treasury Department to require regular, more detailed information from banks about their use of federal aid provided under the Troubled Asset Relief Program. The Treasury has refused to collect such information. Doing so is "essential to meet Treasury's stated goal of bringing transparency to the TARP program and informing the American people and their representatives in Congress about what is being done with their money," the report said.
In a written response, the Treasury again rejected that call. Officials have taken the view that the exact use of the federal aid cannot be tracked because money given to a bank is like water poured into an ocean.
"Although it might be tempting to do so, it is not possible to say that investment of TARP dollars resulted in particular loans, investments or other activities by the recipient," Herbert M. Allison Jr., the assistant Treasury secretary who administers the rescue program, wrote in a letter to Barofsky. LinkHere