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Four largest TARP recipients spent billions on 'questionable transactions': memo |
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Monday, 09 March 2009 |
Rather than using federal bailout money to reinvigorate lending to consumers, some banks that received funds from TARP have spent it on questionable items that have done little to improve the health of the country’s financial sector but have certainly helped out foreign economies such as Dubai and China.
For instance, Citigroup Inc, which received $50 billion in Troubled Asset Relief Program funds, made an $8 billion December loan, not to an American entity, but to a Dubai public sector company, according to a newly released Monday memo by Rep. Dennis Kucinich (D-OH), chairman of the House Domestic Policy Subcommittee.
The Goldman Sachs Group, which received $10 billion in TARP funds at the end of October, saw fit to spend $2 billion earlier in the year on the repurchase of company stock, which resulted in an increase in company share price.
The memo notes of that stock repurchase, “That increase would have constituted a significant benefit to top executives at Goldman Sachs, who typically own large amounts of company stock.”
As of January 3, Goldman Sachs CEO Lloyd Blanldein owned 1,995, 835 shares of the company, according to the memo.
In mid- November, Bank of America spent $7 billion investing in the China Construction Bank Corporation. Bank of America received $25 billion in TARP funds.
J.P. Morgan Treasury Services spent $1 billion investing in cash management and trade finacie solutions in India also in November. J.P Morgan Chase & Co. received $25 billion in TARP funds.
Rep. Kucinich’s office released the memo from the Subcomittee’s Democratic staff ahead of Wednesday’s hearing that will investigate Treasury Department attempts to prevent waste and abuse in the TARP program. According to a press release, the hearing will be specifically looking into the Capital Purchase Program – the largest of the five TARP programs.
The House report notes that while none of these transactions were illegal, they do not stand up well to statements made before Congress by TARP recipients on their understanding Congressional and taxpayer expectations that the TARP funding will be used to reinvigorate domestic lending.
"[A]ll of us at Bank of America understand the responsibilities that come with access to public funds," said Ken Lewis, CEO of Bank of America, in February comments to the House Financial Services Committee. "Taxpayers want to...
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