Paulson: 'Good Portion' of TARP Must Go to Banks
The Senate voted 52 to 42 Thursday against a measure that would have barred the release of the remaining funds under the Troubled Asset Relief Program, essentially releasing the last $350 billion, some of which Treasury Department secretary Henry Paulson has already spent. Within hours of the vote, the Treasury announced an additional $20 billion in TARP aid to -- troubled? -- banking giant Bank of America Corp. (BAC), which had already received $25 billion in capital purchases through the TARP. The move suggested Paulson has not given up his position on focusing TARP funds toward providing capital for banks and non-bank entities, rather than pursue the program's original intent of purchasing mortgage-backed securities and assisting everyday home owners. Even as Congress considers legislation authored by Barney Frank, D-Mass. that will impose restrictions on the use of remaining TARP funds, increase the oversight of the program and require at least $50 billion for mortgage modifications, Paulson publicly stands by his strategy to pour billions of dollars into financial institutions. "At least in my judgment, a good portion of the TARP resources has to be used for capital programs," Paulson told reporters Friday in his final press conference as Treasury secretary, according to a MarketWatch bulletin. His comments come amid increasing criticism over TARP oversight and the transparency of tracking of TARP funds that banks have already received. The National Legal and Policy Center (NLPC) on Thursday announced it had filed a complaint over some charitable donations contributed by BofA and Citigroup Inc. (C), which have now received $45 billion each from the Treasury through TARP (BofA's latest $20 billion infusion was announced Friday). According to the NLPC's complaint, the banks were listed as "Silver" and "Gold" sponsors with respective $30,000 and $50,000 contributions to the Rainbow/PUSH Wall Street Conference taking place in New York City. The Rainbow/PUSH Coalition would not return requests for comment on the alleged contributions before the time this story was published. The NLPC is requesting the TARP inspector general to investigate the legitimacy of such donations when both banks have received so much federal aid to bolster their capital positions in the marketplace. “When the TARP was presented to Congress, secretary Henry Paulson and others argued that the situation was dire, and that the failure of major financial institutions posed a systemic risk to our economy," the complaint reads, in part. "The stated goal was to unfreeze credit so that banks can make loans to businesses and individuals. It was never contemplated that banks use their capital to make donations" to charitable organizations. Write to Diana Golobay at email@example.com. Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.