Banks seeking bailout money are five times more likely to get it if a top executive is also a regional Federal Reserve director, according to an analysis of the Treasury Department's decision making.
According to FinCri Advisor, 44.5 percent of banks with top executives on the board of a Federal Reserve Bank were approved for money through the Troubled Asset Relief Program, compared to 8.3 percent of all eligible U.S. banks.
FinCri advisor is a news website focused on the challenges facing the banking industry.
The Troubled Asset Relief Program, or TARP, is the Treasury Department's overarching financial bailout program. The Capital Purchase Program, or CPP, is the part of the package focused on improving bank liquidity by using government money to buy stock in participating institutions. The government has dedicated $700 billion to the TARP initiative, including $250 billion for the CPP.
FinCri identified 74 top bank executives who sit on the boards of the 12 regional Federal Reserve Banks. Thirty three of the banks run by those executives were approved by Treasury to sell stock to the government.
The approval percentages were higher for banks whose executives sit on East Coast branches of the Fed. According to FinCri Advisor, three out of three banks with executives on the Boston branch received TARP funding, as did five of seven in the same position in the Richmond district, and seven out of 12 in the Atlanta district.
Banks with executives on the Minneapolis and Dallas Fed boards did not receive any bailout funds. However, none of the banks with executives on those boards applied for government aid.
BailoutSleuth duplicated FinCri's research. We noted that three other banks whose top executives served on regional Fed boards were part of larger multi-bank holding companies that got TARP money.
FinCri did not include them. Nor did it include two other banks -- Bank of America Corp. and Wells Fargo & Co. -- with representatives on regional Fed boards. It said those executives were not involved in high-level decision making at those banks, which were two of the biggest TARP recipients
Several executives who sit on regional Fed boards and whose banks got TARP money dismissed the apparent connection, telling FinCri Advisor that the Fed was not involved in their selection process.
One noted that the people chosen for the regional Fed boards are typically accomplished bankers, which could mean their companies are more likely to meet the government's criteria for investment.
FinCri reported that one bank with an executive on the regional Fed received TARP money just days after it signed an agreement with the Comptroller for the Currency to shore up its capital position and halt "unsafe and unsound banking practices."
Florida-based Seacoast Banking Corp. accepted $50 million in TARP funding in December, just three days after signing that agreement. Seacoast's chairman and chief executive, Dennis S. Hudson III, is a director of the Atlanta branch of the Fed.
Although the TARP program is intended to shore up the banking sector by injecting government capital, the program is intended for "healthy'' banks with relatively strong balance sheets. That raises questions about why a financial institution with ongoing regulatory problems would qualify.
Neil M. Barofsky, the inspector general for TARP program, said last month he was conducting an audit to determine whether political pressure or other outside influences played any role in determining which banks got bailout money.
According to FinCri Advisor, 44.5 percent of banks with top executives on the board of a Federal Reserve Bank were approved for money through the Troubled Asset Relief Program, compared to 8.3 percent of all eligible U.S. banks.
FinCri advisor is a news website focused on the challenges facing the banking industry.
The Troubled Asset Relief Program, or TARP, is the Treasury Department's overarching financial bailout program. The Capital Purchase Program, or CPP, is the part of the package focused on improving bank liquidity by using government money to buy stock in participating institutions. The government has dedicated $700 billion to the TARP initiative, including $250 billion for the CPP.
FinCri identified 74 top bank executives who sit on the boards of the 12 regional Federal Reserve Banks. Thirty three of the banks run by those executives were approved by Treasury to sell stock to the government.
The approval percentages were higher for banks whose executives sit on East Coast branches of the Fed. According to FinCri Advisor, three out of three banks with executives on the Boston branch received TARP funding, as did five of seven in the same position in the Richmond district, and seven out of 12 in the Atlanta district.
Banks with executives on the Minneapolis and Dallas Fed boards did not receive any bailout funds. However, none of the banks with executives on those boards applied for government aid.
BailoutSleuth duplicated FinCri's research. We noted that three other banks whose top executives served on regional Fed boards were part of larger multi-bank holding companies that got TARP money.
FinCri did not include them. Nor did it include two other banks -- Bank of America Corp. and Wells Fargo & Co. -- with representatives on regional Fed boards. It said those executives were not involved in high-level decision making at those banks, which were two of the biggest TARP recipients
Several executives who sit on regional Fed boards and whose banks got TARP money dismissed the apparent connection, telling FinCri Advisor that the Fed was not involved in their selection process.
One noted that the people chosen for the regional Fed boards are typically accomplished bankers, which could mean their companies are more likely to meet the government's criteria for investment.
FinCri reported that one bank with an executive on the regional Fed received TARP money just days after it signed an agreement with the Comptroller for the Currency to shore up its capital position and halt "unsafe and unsound banking practices."
Florida-based Seacoast Banking Corp. accepted $50 million in TARP funding in December, just three days after signing that agreement. Seacoast's chairman and chief executive, Dennis S. Hudson III, is a director of the Atlanta branch of the Fed.
Although the TARP program is intended to shore up the banking sector by injecting government capital, the program is intended for "healthy'' banks with relatively strong balance sheets. That raises questions about why a financial institution with ongoing regulatory problems would qualify.
Neil M. Barofsky, the inspector general for TARP program, said last month he was conducting an audit to determine whether political pressure or other outside influences played any role in determining which banks got bailout money.
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