FDIC Asks Banks to Report on How They Spent TARP Funds
One of the biggest scandals of the economic bailout bill passed last fall has to with how the $350 billion set aside for banks through TARP funds was spent. The money was meant to be spent in helping Americans avoid foreclosure. It was supposed to loosen up cash flow and banks were supposed to use that money to refinance homes and engage in loan modification so that foreclosures could be limited. Unfortunately, there is precious little evidence that the money went to help people in foreclosure; instead the banks are collectively sitting on a massive cash reserve. It’s little wonder people are upset that the likely release of the remaining TARP funds may end up doing little beyond enriching big banks while regular folks continue to struggle with foreclosure, unable to avoid watching their homes go under.
So, in an effort to force transparency and accountability, the FDIC is requiring banks to report on how they spent TARP funds they received. Naturally, the American Bankers Association is spinning for all their worth, reports Real Estate Pro Articles:
According to Wayne Abernathy, a top executive of the American Bankers Association, the FDIC directive will give them the opportunity to show how the federal funds enabled association members to continue providing affordable loans to consumers and help mortgage borrowers avoid foreclosure.
I’m not so sure about that. I suppose the loans have been more affordable, in that mortgage interest rates have been so low, but precious few people have been approved, and many of the people in foreclosure trouble are not actually being helped. But it’s a nice thought. Incoming president, Barack Obama, and his economic team claim that they will hold banks receiving the second half of TARP funds even more accountable, and that they will attach strings requiring limits to executive compensation and demanding the allocation of funds to directly help those in danger of foreclosure.
