Word: tarps
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...Reserve Chairman Ben Bernanke said the recession is probably over. But that hasn't halted the Treasury Department from continuing to dole out billions of dollars to financial firms. The latest installment came two weeks ago, when the Treasury sent nearly $75 million from the Troubled Asset Relief Program (TARP) to five banks. Community Bancshares of Mississippi was the largest recipient, getting $52 million in federal funds. All told, the government has spent nearly $5 billion in rescue funds in the past three months. Many of the recipients have been small banks. (See TIME's special report "The Financial Crisis...
Some see this as a smart move. Last week, Senate majority leader Harry Reid, a Democrat from Nevada, sent a letter to Treasury Secretary Timothy Geithner urging him to consider giving TARP funds to more small banks, even those that might fail without government assistance. "Comparatively modest assistance from the government now could make a significant difference to these banks, their customers, and their communities, as well as help ensure the fledgling recovery we are seeing in our economy continues," wrote Reid...
...fine financial shape. U.S. Century Bank, for example, boosted its net interest earnings, a key measure of profitability for banks, nearly 20%, to $12.6 million, in the second quarter of this year. Yet in early August the government decided to send the bank $50.2 million in TARP funds. U.S. Century executives say they plan to use the money to increase lending and boost profits. "The banks that are getting the TARP money now really don't need it," says Steve Verdier, who heads government affairs for the trade group Independent Community Bankers of America. His organization favors extending TARP funds...
...Treasury Department says the TARP funds were never meant to solely prop up failing banks. In fact, officials say one of the criteria for getting funds under the TARP's Capital Purchase Program, in which the government injects money into a bank in return for preferred shares, is proof that a bank could survive on its own. While the Treasury is winding down some of its programs meant to assist the financial sector, it has no plans to end the TARP program early. The Treasury Department says it is still getting new requests from banks for TARP funds. (Small banks...
Earlier this year, Geithner gave a speech promising more assistance from TARP to smaller banks. Treasury officials say the Obama Administration has placed an increased emphasis on using TARP funds to ensure the strength of smaller banks. "The Capital Purchase Program expansion for small banks is helping to stabilize the economy, support small businesses and get us on a path to recovery," says Treasury spokeswoman Meg Reilly...