Tuesday, March 29, 2011
Grassley Warns of Bailed-out Banks' Repaying Bail-outs With Government Funds
WASHINGTON - Sen. Chuck Grassley is asking the Treasury secretary for assurances that banks bailed out with government funds will not be allowed to use another government program to pay back their bailouts.
"The reports that banks from New York to Nashville are using federal dollars from the so-called Small Business Lending Fund to increase profits and 'pay back' TARP make this look like another TARP-style money shuffle," Grassley said. "Replacing one form of government subsidy with another wasn't a repayment when GM did it and it still isn't. The Treasury Department has an obligation to put the brakes on any tricky bookkeeping that misleads the American taxpayer and subverts what this program was supposed to do."
Grassley wrote to Treasury Secretary Timothy Geithner, citing media reports and a bank earnings statement to investors that banks in Pennsylvania, Nashville and New York that received money through the $700 billion Troubled Asset Relief Program (TARP) are considering paying back that bailout with money received through the federal Small Business Lending Fund. One bank touted increased "profitability" in converting TARP funds to Small Business Lending Funds in its quarterly earnings report.
Grassley asked Geithner for assurances that a repayment shuffle will not take place. He asked for a description of Treasury's oversight plans to prevent such a shuffle and for information including a list of banks that have applied for loans under the small business program.
Last year, Grassley exposed the misleading nature of claims from the Treasury Department and General Motors that the company repaid a TARP loan through a business turn-around. In fact, its repayment was via federal money held by the government.
The text of Grassley's letter to the Treasury secretary is available here.