TARP report: Treasury misled public

 

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By Louise Story, New York Times

The inspector general who oversees the government’s bailout of the banking system is criticizing the Treasury Department for misleading public statements last fall, also raising the possibility that it unfairly disbursed money to the biggest banks.

A Treasury official made incorrect statements about the health of the nation’s biggest banks even as the government doled out billions in aid, according to a report on the Troubled Asset Relief Program to be released today by the special inspector general, Neil Barofksy.

The report also provides new insight into how the Treasury allocated billions of dollars to nine of Wall Street’s largest players. The report says Bank of America appeared to qualify for more aid earlier, under the government plan. That adds another element of intrigue to continuing investigations of the bank’s merger with Merrill Lynch, and the role regulators played.

The bailout formula called for banks to get an amount equal to as much as 3 percent of their risk-weighted assets, with aid capped at $25 billion, according to the report. By size, Citigroup, JPMorgan Chase and Bank of America qualified for more, and the first two received $25 billion.

But Bank of America received only $15 billion in October, since Merrill Lynch was earmarked for $10 billion. The two companies agreed to a merger, though their deal had not yet been approved by regulators or shareholders.

Bank of America ultimately received Merrill’s $10 billion in January – as well as $20 billion in additional bailout funds. But if the bank had not been involved in the Merrill deal, it would probably have received $25 billion to start.

Read the whole article here.

 
 
 

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