Treasury announced that it has provided $14.77 billion in fund to local banks. This, on the surface seems to make sense, but you read beyond the headline and there a problem. $13.388 billion went to two institutions, Bank of America and American Express. This represented 90.6% of the total. At the other extreme, we gave $1.065 million to Independence Bank in Rhode Island. We also provided $2 million to Surrey Bancorp in North Carolina. I am sure that we would be interested in the "pay for play" connection on some of these payments. Rent-seeking is king!
If some of these small institutions are in trouble and need funds, shouldn't regulators be pushing for mergers? How much work is involved to monitor the 41 banks that represent less than 10% of the program. 95% of the banks get less than 10% of the funds. If we have major mortgage foreclosures, should the money be spent this way on small institutions. The loss on one home in California may be greater than the capital given to some of these banks. Was this the intent of the program? I thought we wanted to use the power of the Treasury to have a big impact on liquidity.
If some of these small institutions are in trouble and need funds, shouldn't regulators be pushing for mergers? How much work is involved to monitor the 41 banks that represent less than 10% of the program. 95% of the banks get less than 10% of the funds. If we have major mortgage foreclosures, should the money be spent this way on small institutions. The loss on one home in California may be greater than the capital given to some of these banks. Was this the intent of the program? I thought we wanted to use the power of the Treasury to have a big impact on liquidity.
No comments:
Post a Comment