Tarp inspector general calls for more clarity on banks' use of funds
The US Treasury's special inspector general for the Troubled Assets Relief Program (Tarp), Neil Barofsky, has called on the Treasury to force banks to report their use of the Tarp's bailout funds. But the Treasury is reluctant to do so.
The inspector general's office carried out a survey of banks that had received Tarp funds - most said they had used them to expand lending, increase capital levels or buy mortgage-backed securities, it found. Given the high level of compliance - 98% responded to the survey - the inspector general argued that continuing to monitor banks' use of the Tarp funds would be practical.
"These responses demonstrate that banks can provide useful information to improve transparency over how they use TARP funds," the report, published today, said. In order "to meet the Treasury's stated goal of bringing transparency to the TARP program and informing the American people and their representatives in Congress on what is being done with their investment", the Treasury should order banks to report regularly on their use of the funds.
But so far, although the inspector general's office has recommended this before, the Treasury has not done so. The assistant secretary for financial stability, Herbert Allison, argued in a letter to the inspector general on July 15 that it was impossible for banks to trace Tarp money to specific loans or investments. "Even if Tarp investments could be traced to particular uses, those uses cannot be said to be attributable to the Tarp investment if the same expenditures would have been made from other sources...in the absence of Tarp funding," he wrote.
But, the inspector general's report responded, "For the Treasury to discount wholly [the survey's] results because a particular bank may not be able to say which dollar was used for a specific purpose substantially underestimates a bank's capacity - on a practical level - to know how its resources are being utilized."
Allison was missing the point, it continued. The fact banks had been able to reply to the survey showed they were able to link, through budgeting, Tarp funds with specific loans or capital buildups. "The fact that there may be some limitations on the precision of the data that could be collected by requiring use of funds reporting does not mean that such reporting could not generate meaningful information," the report added.
See also: US Treasury failing on Tarp oversight, report finds
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
More on Regulation
Banks will not be frowned upon for discount window borrowing – Fed official
Risk Live: more banks have completed paperwork to access Fed lending facility than a year ago
Capital One puts OCC’s tough stance on mergers to the test
Proposed Discover deal should be approved but will go under the microscope, ex-regulators say
As FCMs dwindle, regulators fear systemic risk
Panellists highlight dangers of clearing membership becoming more concentrated
EU banks fear green asset ratios paint an unfair picture
Industry lobbyist clashes with lawmaker over usefulness of new sustainability disclosure
EU watchdogs to launch prop trader capital review in April
Prop traders say bank-style IFR rules are driving them out, but doubt EBA will suggest changes
Investors say new SEC disclosures may sit on shelf
Advisory committee questions value of rule 605 changes, even for retail investors
CFTC hears ‘call to action’ from swaps end-users on Basel III
Commissioner Pham mulls engaging with prudential regulators over capital hit on clearing
Iosco gears up for ‘intensive work’ on AI regulation
Watchdogs risk ‘falling behind the curve’, secretary-general warns; FSB also working on guidance
Most read
- As FCMs dwindle, regulators fear systemic risk
- Options market still searching for cause of the Vix plunge
- Top 10 op risks: AI fears drive cyber risk to record high