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By Christopher S. Rugaber
Associated Press
POSTED: 01:00 p.m. EST, Jan 13, 2009
WASHINGTON: The Treasury Department is developing tools to measure whether banks that receive funds from the $700 billion financial industry rescue program are increasing lending.
Neel Kashkari, assistant Treasury secretary in charge of the bailout program, said in remarks today that the department will compare the level of lending by banks that have received government money with lending levels by similar banks that haven't gotten assistance.
The Bush administration has been strongly criticized by lawmakers from both parties for not doing more to track the $189 billion invested so far in more than 250 banks in an effort to increase consumer credit and lending to businesses.
Kashkari, a Stow native, said the government will use regular quarterly reports on lending that banks already submit and also will collect monthly data from the largest banks that have received government money. The department hopes to begin gathering the data by the end of this month and to publish the results several weeks later, he said.
The Associated Press last month asked 21 banks that received more than $1 billion from the program to describe what has been done with the money. None would provide any specifics.
Kashkari said today he would remain at his post for several weeks after President-elect Barack Obama is inaugurated Jan. 20, to assist with the transition.
Kashkari's remarks reflect growing pressure on the financial industry to provide more accounting for how the funds are being used. The Federal Deposit Insurance Corp. on Monday called on the banks it regulates to document how they are using the government funds to boost ''prudent lending'' and help at-risk borrowers avoid losing their homes to foreclosure.
Kashkari said banks might use the money to shore up their balance sheets in addition to lending, particularly if they are forced to write down the value of loans they carry on the books. Last year, major financial institutions such as Citigroup Inc., Merrill Lynch & Co. Inc. and Morgan Stanley booked billions of dollars of losses after mortgage-related securities they owned plunged in value.
President George W. Bush, acting at the behest of Obama, on Monday asked Congress to release the second $350 billion of the rescue fund, known as the Troubled Asset Relief Program, or TARP.
Larry Summers, Obama's choice for National Economic Council director, sought to reassure lawmakers in a letter Monday that the new president will impose tougher restrictions and oversight on how the money is spent.
''The president-elect has directed his Treasury Department to monitor, measure and track what is happening to lending by recipients of our financial rescue assistance,'' Summers wrote in his letter.
Kashkari said the government on Friday invested in 43 additional banks, bringing the total amount invested to $189 billion in 257 banks in 42 states and Puerto Rico.
In addition, the Treasury Department has opened the TARP to about 3,000 small community banks that weren't previously eligible to participate, he said.
The current administration already has committed more than the initial $350 billion of the rescue fund, using it to inject capital into banks with few strings attached and to bail out ailing financial companies considered too big to fail without further damage to the economy.
A $6 billion assistance package last month for General Motors Corp.'s financing arm, GMAC LLC, pushed Treasury's total commitments to nearly $355 billion and was possible only because a large amount of the committed money hasn't yet been spent.
WASHINGTON: The Treasury Department is developing tools to measure whether banks that receive funds from the $700 billion financial industry rescue program are increasing lending.
Neel Kashkari, assistant Treasury secretary in charge of the bailout program, said in remarks today that the department will compare the level of lending by banks that have received government money with lending levels by similar banks that haven't gotten assistance.
The Bush administration has been strongly criticized by lawmakers from both parties for not doing more to track the $189 billion invested so far in more than 250 banks in an effort to increase consumer credit and lending to businesses.
Kashkari, a Stow native, said the government will use regular quarterly reports on lending that banks already submit and also will collect monthly data from the largest banks that have received government money. The department hopes to begin gathering the data by the end of this month and to publish the results several weeks later, he said.
The Associated Press last month asked 21 banks that received more than $1 billion from the program to describe what has been done with the money. None would provide any specifics.
Kashkari said today he would remain at his post for several weeks after President-elect Barack Obama is inaugurated Jan. 20, to assist with the transition.
Kashkari's remarks reflect growing pressure on the financial industry to provide more accounting for how the funds are being used. The Federal Deposit Insurance Corp. on Monday called on the banks it regulates to document how they are using the government funds to boost ''prudent lending'' and help at-risk borrowers avoid losing their homes to foreclosure.
Kashkari said banks might use the money to shore up their balance sheets in addition to lending, particularly if they are forced to write down the value of loans they carry on the books. Last year, major financial institutions such as Citigroup Inc., Merrill Lynch & Co. Inc. and Morgan Stanley booked billions of dollars of losses after mortgage-related securities they owned plunged in value.
President George W. Bush, acting at the behest of Obama, on Monday asked Congress to release the second $350 billion of the rescue fund, known as the Troubled Asset Relief Program, or TARP.
Larry Summers, Obama's choice for National Economic Council director, sought to reassure lawmakers in a letter Monday that the new president will impose tougher restrictions and oversight on how the money is spent.
''The president-elect has directed his Treasury Department to monitor, measure and track what is happening to lending by recipients of our financial rescue assistance,'' Summers wrote in his letter.
Kashkari said the government on Friday invested in 43 additional banks, bringing the total amount invested to $189 billion in 257 banks in 42 states and Puerto Rico.
In addition, the Treasury Department has opened the TARP to about 3,000 small community banks that weren't previously eligible to participate, he said.
The current administration already has committed more than the initial $350 billion of the rescue fund, using it to inject capital into banks with few strings attached and to bail out ailing financial companies considered too big to fail without further damage to the economy.
A $6 billion assistance package last month for General Motors Corp.'s financing arm, GMAC LLC, pushed Treasury's total commitments to nearly $355 billion and was possible only because a large amount of the committed money hasn't yet been spent.
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