According to analysts at Keefe, Bruyette and Woods, a New York financial services company, the Treasury has invested $158.6 billion from the CPP in 29 financial institutions, while another 55 companies have received approval to access $26.4 billion. A further 92 institutions have filed applications to access $9.2 billion.
Banks have not been the only beneficiaries. The US Federal Reserve has also approved an application from American Express, the credit card company, to become a bank holding company, thereby allowing it to access the CPP.
Until recently AIG, the insurance giant, had been the only insurer to receive Treasury capital, with an initial injection of $85 billion followed by a further $40 billion on November 10 - this was not part of the Tarp, but a one-off rescue package intended for AIG alone.
But now three prominent insurers have sought participation in the CPP by converting themselves to saving and loan holding companies and acquiring federally regulated savings banks.
Hartford Financial Services tendered its application to the Office of Thrift Supervision (OTS) on November 14, along with its intention to acquire the parent company of Federal Trust Bank for $10 million. The company believes it could receive between $1.1 billion and $3.4 billion from the scheme. On 17 November, Lincoln Financial applied to the OTS and agreed to purchase Newton County Loan and Savings. Genworth Financial applied to the OTS and acquired Interbank on November 16.
Spreads on five year credit default swaps, which measure the cost of credit protection on financial institutions, on all three insurers have increased by between 85 basis points and 105bp since the announcements.
Meanwhile, Aegon, the Hague-based insurer that has already received €3 billion from the Dutch government, is investigating acquiring a thrift in the US to make it eligible for the Tarp. The company insists that it is a merely precautionary measure, as it holds sufficiently high capital levels at present.
Public sector bodies have also tried to take advantage of the scheme. In a letter to Treasury secretary Heny Paulson, the cities of Philadelphia, Phoenix and Atlanta proposed that $50 billion of the Tarp should be reserved in order to capitalise an “Urban Infrastructure and Development Fund”. The letter also asked for a lending facility to assist public pension schemes, and a short-term borrowing facility to address cash-flow needs.
Other cities have been keen to stress their openness to government capital. Chuck Reed, mayor of San Jose, retracted his earlier call for $14 billion, but added: “if Tarp funds become available to cities, I will work to ensure that San Jose is allotted its fair share.” Mayors of other major cities, including Michael Bloomberg of New York, have made similar statements.
The Treasury has defended its stance of the Tarp being made available exclusively to financial companies, warding off suggestions that a portion will be appropriated to further boost the auto industry.
“The Tarp funding is there for financial institutions,” emphasised White House press secretary Dana Perino in a press conference on Monday, adding that opening up Tarp funding to other industries would be a “slippery slope”.
See also: Paulson: buying MBSs no longer Tarp priority
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