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Real Time With Bill Maher | February 19, 2010 | Opening + Elizabeth Warren
Citigroup Inc. (NYSE:C) apparently doesn’t have an exit strategy to pay back the $45 billion in Troubled Asset Relief Program (TARP) funds the government gave it. Is this really a shocker?
Earlier this week, Bank of America Corp. (NYSE:BAC) and Wells Fargo & Co. (NYSE:WFC) both discussed ways to eventually pay back their bailout money. However, Citi has been pretty much mum on the subject, aside from having its shareholders approve the final arrangements giving U.S. taxpayers a 33.6% stake in the company
Now, Elizabeth Warren, chairwoman of the Congressional Oversight Panel for the TARP, is concerned that the silence is because Citi doesn’t have a plan. Warren told the New York Post that regulators don’t have any insight into how Citi’s management team plans on paying back its bailout loans.”Too big to fail and not strong enough to succeed is obviously no exit strategy at all,” Warren told the Post.
No wonder federal regulators forced the bank to hire outside consultant Egon Zehnder International to evaluate whether the current management team is cut out to lead the bank out the crisis. Like most investors, the government needs a bit of reassurance its investment is going to succeed.
Let’s hope CEO Vikarm Pandit’s right hand man, Lewis B. Kaden — the most famous banker you’ve never heard of and Citi’s vice chairman in charge of human resources, government affairs, and philanthropy — has some words of wisdom that will allow Pandit to keep his job. – Maria Woehr
Wed, Apr. 01, 2009
WASHINGTON — The massive programs designed to rescue the nation’s financial sector are operating without adequate oversight, with vague goals and limited disclosure of their details to the taxpayers who are paying for them, government watchdogs told a Senate panel Tuesday.
The Troubled Asset Relief Program, or TARP, was launched in the midst of last fall’s collapse of the nation’s banking system and is designed to get loans flowing to businesses and individuals.
But “without a clearer explanation” about parts of the program, “it is not possible to exercise meaningful oversight over Treasury’s actions,” said Elizabeth Warren, a Harvard Law School professor who leads a special congressional oversight panel monitoring the TARP program. Her comments came in a Senate Finance Committee hearing on the bailout program.
Noting that TARP passed Congress six months ago, Warren said that her group has repeatedly called on the Treasury Department to provide a clear strategy for the program — and that “the absence of such a vision hampers effective oversight.”
Although she has asked Treasury to explain its strategy, “Congress and the American public have no clear answer to that question.”
TARP is one of several programs the government has launched in recent months to help ailing institutions and even bolster healthy banks. Warren singled out one program, known as TALF, for appearing to involve “substantial downside risk and high costs for the American taxpayer” while offering big potential rewards for private interests. She said the public information about that program was “contradictory, promoting substantial confusion.”
The Government Accountability Office shared some of the same concerns, saying in a new report that “Treasury continues to struggle with developing an effective overall communication strategy” for the TARP program.
Beyond that, the GAO’s report pointed out the difficulty in even measuring whether TARP is working. As of March 27, the Treasury Department had handed out more than $300 billion of the $700 billion in approved TARP funds, the GAO said.
The majority of that money went to banks large and small around the country. And there are signs that credit is flowing from those banks; the GAO said that several hundred billion dollars in new loans were processed by the largest TARP recipients in December and January.
But crediting TARP for that is difficult, given the range of actions the government has taken since October. “Isolating the effect of TARP’s activities continues to be difficult,” the GAO’s Gene Dodaro said in his prepared testimony.
The Treasury Department, in a statement, said that “transparency and accountability are central to ensuring that taxpayer funds are spent wisely,” and noted that the department is actively working to respond to the recommendations of GAO and other oversight bodies. Among other things, the department has hired more staff and expanded its survey on bank lending activities.
Iowa Sen. Charles Grassley, the panel’s ranking Republican, described himself as “disappointed and frustrated” in the amount of information available about the program. “You can’t measure effectiveness when you don’t know what the goals and objectives of a program are, or how the program is being run,” he said.
Warren’s oversight panel made news earlier this year with its report that Treasury’s bailout programs had overpaid by an estimated $78 billion in its transactions with the nation’s ailing financial institutions. She said that issue is still under investigation.
By MATT APUZZO– It’s something any bank would demand to know before handing out a loan: Where’s the money going?
But after receiving billions in aid from U.S. taxpayers, the nation’s largest banks say they can’t track exactly how they’re spending the money or they simply refuse to discuss it.
“We’ve lent some of it. We’ve not lent some of it. We’ve not given any accounting of, ‘Here’s how we’re doing it,'” said Thomas Kelly, a spokesman for JPMorgan Chase, which received $25 billion in emergency bailout money. “We have not disclosed that to the public. We’re declining to.”
The Associated Press contacted 21 banks that received at least $1 billion in government money and asked four questions: How much has been spent? What was it spent on? How much is being held in savings, and what’s the plan for the rest?
None of the banks provided specific answers.
“We’re not providing dollar-in, dollar-out tracking,” said Barry Koling, a spokesman for Atlanta, Ga.-based SunTrust Banks Inc., which got $3.5 billion in taxpayer dollars.
Some banks said they simply didn’t know where the money was going.
“We manage our capital in its aggregate,” said Regions Financial Corp. (RF) spokesman Tim Deighton, who said the Birmingham, Ala.-based company is not tracking how it is spending the $3.5 billion it received as part of the financial bailout.
The answers highlight the secrecy surrounding the Troubled Assets Relief Program, which earmarked $700 billion – about the size of the Netherlands’ economy – to help rescue the financial industry. The Treasury Department has been using the money to buy stock in U.S. banks, hoping that the sudden inflow of cash will get banks to start lending money.
There has been no accounting of how banks spend that money. Lawmakers summoned bank executives to Capitol Hill last month and implored them to lend the money – not to hoard it or spend it on corporate bonuses, junkets or to buy other banks. But there is no process in place to make sure that’s happening and there are no consequences for banks who don’t comply.
“It is entirely appropriate for the American people to know how their taxpayer dollars are being spent in private industry,” said Elizabeth Warren, the top congressional watchdog overseeing the financial bailout.
But, at least for now, there’s no way for taxpayers to find that out.
Pressured by the Bush administration to approve the money quickly, Congress attached nearly no strings on the $700 billion bailout in October. And the Treasury Department, which doles out the money, never asked banks how it would be spent.
“Those are legitimate questions that should have been asked on Day One,” said Rep. Scott Garrett, R-N.J., a House Financial Services Committee member who opposed the bailout as it was rushed through Congress. “Where is the money going to go to? How is it going to be spent? When are we going to get a record on it?”
Nearly every bank AP questioned – including Citibank and Bank of America, two of the largest recipients of bailout money – responded with generic public relations statements explaining that the money was being used to strengthen balance sheets and continue making loans to ease the credit crisis.
A few banks described company-specific programs, such as JPMorgan Chase’s plan to lend $5 billion to nonprofit and health care companies next year. Richard Becker, senior vice president of Wisconsin-based Marshall & Ilsley Corp. (MI) (MI), said the $1.75 billion in bailout money allowed the bank to temporarily stop foreclosing on homes.
But no bank provided even the most basic accounting for the federal money.
“We’re choosing not to disclose that,” said Kevin Heine, spokesman for Bank of New York Mellon, which received about $3 billion.
Others said the money couldn’t be tracked. Bob Denham, a spokesman for North Carolina-based BB&T Corp., said the bailout money “doesn’t have its own bucket.” But he said taxpayer money wasn’t used in the bank’s recent purchase of a Florida insurance company. Asked how he could be sure, since the money wasn’t being tracked, Denham said the bank would have made that deal regardless.
Others, such as Morgan Stanley (MS) spokeswoman Carissa Ramirez, offered to discuss the matter with reporters on condition of anonymity. When AP refused, Ramirez sent an e-mail saying: “We are going to decline to comment on your story.”
Most banks wouldn’t say why they were keeping the details secret.
“We’re not sharing any other details. We’re just not at this time,” said Wendy Walker, a spokeswoman for Dallas-based Comerica Inc., which received $2.25 billion from the government.
Heine, the New York Mellon Corp. spokesman who said he wouldn’t share spending specifics, added: “I just would prefer if you wouldn’t say that we’re not going to discuss those details.”
The banks which came closest to answering the questions were those, such as U.S. Bancorp and Huntington Bancshares Inc., that only recently received the money and have yet to spend it. But neither provided anything more than a generic summary of how the money would be spent.
Lawmakers say they want to tighten restrictions on the remaining, yet-to-be-released $350 billion block of bailout money before more cash is handed out. Treasury Secretary Henry Paulson said the department is trying to step up its monitoring of bank spending.
“What we’ve been doing here is moving, I think, with lightning speed to put necessary programs in place, to develop them, implement them, and then we need to monitor them while we’re doing this,” Paulson said at a recent forum in New York. “So we’re building this organization as we’re going.”
Warren, the congressional watchdog appointed by Democrats, said her oversight panel will try to force the banks to say where they’ve spent the money.
“It would take a lot of nerve not to give answers,” she said.
But Warren said she’s surprised she even has to ask.
“If the appropriate restrictions were put on the money to begin with, if the appropriate transparency was in place, then we wouldn’t be in a position where you’re trying to call every recipient and get the basic information that should already be in public documents,” she said.
Garrett, the New Jersey congressman, said the nation might never get a clear answer on where hundreds of billions of dollars went.
“A year or two ago, when we talked about spending $100 million for a bridge to nowhere, that was considered a scandal,” he said.
Associated Press writers Stevenson Jacobs in New York and Christopher S. Rugaber and Daniel Wagner in Washington contributed to this report.