But Bloomberg News reported today that Goldman actually borrowed money through the Fed's discount window at least five times, starting in September 2008, when the financial crisis took hold with a vengeance.
Bloomberg said data from the Fed showed that Goldman Sachs Bank USA, one of the company's subsidiaries, took overnight loans on Sept. 23, Oct. 1 and Oct. 23 of 2008, and on Sept. 9, 2009 and Jan. 11 of last year.
The largest amount of money that the Goldman unit borrowed was $50 million; the smallest was $1 million. Both are relative minor sums relative to those that other financial companies received from the Fed to help them maintain liquidity during the crisis.
Cohn testified at a Financial Crisis Inquiry Commission hearing last June. According to Bloomberg, Cohn responded to a question about Goldman's use of the Fed's overnight lending program by saying "we used it one night at the request of the Fed to make sure our systems were linked with their systems, and it was for a de minimis amount of money.''
Bloomberg said Peter J. Wallison, a member of the Financial Crisis Inquiry Commmission, followed up by asking, "You never had to use it after that?"
Cohn's response was "No, and as I said, we used it on the Fed's request."
ZeroHedge.com, a financial blog, wondered Thursday whether Cohn would be summoned back to Washington to explain why he lied under oath, or would face any other consequences for his inaccurate testimony.
At this time last year, 41 banks had been shut down.
Advantage National Bank Group, based in Elk Grove Village, Ill., absorbed Bank of Commerce, which had one branch, $161.4 million in deposits and $163.1 million in assets.
Advantage National paid a 0.1 percent premium for the deposits. The Federal Deposit Insurance Corp. has agreed to share in the losses on $145.7 million of the acquired assets.
Bank of Commerce had received a "prompt corrective action'' notice from the FDIC in December, ordering it to raise new capital or find a buyer or merger partner. The bank was unsuccessful in that pursuit.
The FDIC said Bank of Commerce's failure would cost its deposit insurance fund an estimated $41.9 million.
The Congressional Oversight Panel's final report on the Troubled Asset Relief Program was, in many areas, its most deeply critical.
Citing such faults as a lack of transparency, an absence of clear goals, conflicting interests, and the elevation of the "too big to fail" philosophy to the level of official policy, the COP ended its run by assigning very low marks to the Treasury Departments's handling of TARP.
The 233-page report acknowledges that America has found its way through a "wrenching recession" and managed to avoid a second Great Depression, with the country on its way to economic recovery (page 182). Yet the report goes to great lengths to avoid the impression that this turnaround was solely, or even primarily the product of the Treasury or TARP.
"Indeed," the passage continues, "the TARP in isolation may have been insufficient to make much of a difference to the broader economy."
One of the more striking subsections of the report (pages 141-142) casts the American International Group Inc. fiasco as the model for "the tangled nature of relationships on Wall Street" that eroded both investor confidence and the general public's perception of a game played with few, if any, rules.
As the saga unfolded, investment bankers, regulators and various law firms shifted allegiances and roles, sometimes in a matter of moments.
Many government regulators and TARP officials, for example, were former employees of the private entities they were now charged to oversee.
The Treasury defended its actions and hiring policies at the time by claiming that only Wall Street insiders would have the acumen to extricate the deeply ingrained relationships between and among fellow insiders.
The report faults regulators for failing to recognize "that at a time when the American taxpayer was being asked to bear extraordinary burdens, [government entities] had a special responsibility to ensure that their actions did not undermine public trust by failing to address all potential conflicts and the appearance of conflicts that could arise" (page 141).
COP noted that the lack of transparency inherent in TARP had its roots in the earliest injections of capital into "very large financial institutions without requiring banks to reveal how the money was used" (page 187).
Such opaque operations ensured that taxpayers would never be able "to hold the Treasury fully accountable for its actions" from the incipient phases of the bailout. It is unlikely that the public will ever know how its investments were utilized, the panel said, and it is all but certain that popular opinion of TARP will always be tinged with anger due to the secrecy surrounding Treasury's efforts.
The report at one point attributes what it characterized as the Treasury's lack of clear goals more to the agency's failure to collect sufficient data initially and to update relevant information as programs have run their course. In the case of the Home Affordable Modification Program (HAMP), for example, the COP claims that the Treasury has "flown blind," resulting in the inability to spot trends affecting the behavior of lenders and mortgate servicers (page 11).
When the president unveiled HAMP in early 2009, it was announced that it would avert 3 million to 4 million foreclosures. The program is now targeted to prevent closer to 700,000 to 800,000 foreclosures, although the "Treasury has never formally announced a new target."
The oversight panel noted that the wider economy is perhaps most seriously threatened by the TARP's near canonization of the "too big to fail" approach, which has the effect of distorting markets.
Bailoutsleuth noted in a February 15th 2011 story that the COP had been expressing growing official concern about that policy, when members Kenneth R. Troske and Mark McWatters claimed that the strategy was courting disaster. As long as the Treasury would bail out companies deemed "too big to fail,'' they opined, such institutions would be encouraged to take excessive risks, since they can "reap the benefits, but will not suffer the consequences if the gambles are unsuccessful."
The latest report claims that the moral hazard of such approaches is especially harmful for banks that are "small enough to fail." Markets have assumed that it is safer to do business with large institutions and that, "as a result, small banks continue to pay more to borrow than very large banks--an ongoing distortion in the marketplace" (page 10). "Credit rating agencies continue to adjust the credit ratings of very large banks to reflect their implicit government guarantee."
The report is COP's 30th. The panel will terminate, by statute, on April 3.
In his resignation letter to President Obama, Barofsky hailed his office's ability to provide a level of transparency to the $700 billion bailout program while helping gain the convictions of 14 individuals for criminal fraud, avoiding $550 million in potential fraud losses, and recovering an additional $150 million in other fraud monies.
Such activity would, he noted, ensure "that SIGTARP will more than pay for itself for its entire existence."
Barofsky's actions and demeanor were not without their detractors, however, and his departure was viewed with approval in at least some quarters. He was especially critical of the Treasury Department and the Federal Reserve Bank of New York in relation to the enormous bailout of the American International Group Inc., possibly TARP's biggest black eye.
Timothy F. Geithner was the head of the New York Fed at the time, and was soon afterward named Secretary of the Treasury.
An employee of the Treasury, speaking to the Washington Post on the condition of anonymity, claimed that Treasury was not afraid of critics, but asserted that Barofsky had "been consistently wrong about a lot of big things."
The story said that some at Treasury and in the financial services industry viewed Barofsky, a former federal prosecutor, as a self-promoter who tended to overreach his boundaries. According to another Treasury employee, the resignation "was like a nice valentine to us."
Barofsky himself perhaps found the ideals and realities of his job to be rather disparate. In March 2009 he set out to dissect the $165 million in bonuses paid out by AIG even after its bailout by taxpayers. His failure to claw back any of the funds or to mete out restorative justice in the eyes of the taxpayers was a shortcoming he shared with Kenneth Feinberg, TARP's compensation czar.
Oddly enough, Monday was also the day the Congressional Oversight Panel released its own report that took special umbrage with Feinberg's inability or unwillingness to claw back funds.
One area where Barofsky and the COP report were in total accord, however, was their criticism of the "too-big-to-fail" philosophy adopted by the Treasury in relation to companies such as Bank of America Corp., General Motors Co., and AIG, among others.
In his Quarterly Report to Congress in January, Barofsky noted that the problem had not been solved and that such safety nets were deleterious to any economic recovery. "The SIGTARP believes," he said at the time, "we are running the risks of repeating the same mistakes that resulted in the American people footing the bill for the largest bailout in American history."
As reported by Bailoutsleuth earlier this week, members of the Congressional Oversight Panel voiced the identical concern. Two COP members repeated the warning of the too big to fail strategy, fearing that companies "can reap the benefits but will not suffer the consequences if the gambles are unsuccessful."
Bridge
Capital Holdings, the San Jose, Calif.-based parent company of Bridge Bank and a December 2008
recipient of $23.9 million in TARP money, said it is ready to repay
the government and leave the program.
The company plans to redeem all
of the preferred stock that it sold to the Treasury Department in 2008. It said it
has procured all necessary regulatory approvals to complete its departure.
Bridge Capital has paid more
than $2.4 million to the U.S. government over the life of its participation in
TARP's Capital Purchase Program. According to the company's press
statement, it also intends to repurchase the common stock warrants that it
issued to the Treasury in the initial transaction.
Those warrants cover 396,412
shares of Bridge Capital's common stock.
No definitive agreement on the repurchase price has been reached.
Daniel P. Myers, Bridge Capital's chief executive officer, called the redemption of the TARP shares a significant milestone for the company. "We believe [this] reflects the strength of our balance sheet and our ability to continue actively meeting the financing needs of our growing Silicon Valley customer base."
The subsidiary, Bridge Bank, is a full-service business bank catering to small, medium and emerging technology companies.
Bridge Capital raised more than
$30 million in capital through a stock placement last November. The company said at the time that it intended to use part of that money to redeem its TARP shares.
But the panel said that Kenneth Feinberg, the program's Special Master for Executive Compensation, "has fallen short in his far broader goal of permanently changing Wall Street's pay practices."
Although past oversight reports have looked at executive compensation, the February report is unique in that it addresses that topic almost exclusively.
The seven companies deemed to be recipients of exceptional taxpayer assistance are American International Group inc., Bank of America Corp., Chrysler LLC, Chrysler Financial LLC, Citigroup Inc., General Motors Co., and GMAC Financial Services, now known as Ally Financial.
The report particularly praised Feinberg for decreasing the overall compensation for the top 25 executives at each of the seven companies by an average of 54.8 percent from from 2008 to 2009. In addition to those cuts, Feinberg also managed to reduce or cap annual cash payments for the same group of employees to $500,000 or less.
The successful imposition of such limits was deemed a major coup. Officials believed TARP restrictions were necessary to help taxpayers to recover their investment in the companies at the same time, executives needed to acknowledge taxpayer anger over inflated executive pay at bailed-out companies and press forward to stabilize the teetering financial system.
Feinberg was praised for assuring that stock received as salary by those same executives should be redeemable only over a four-year period. Such strictures would supposedly tie the executives' rewards to the long-term performance of the company rather than individual ambitions.
Finally, Feinberg to limit incentive payments to one-third of executive compensation (as required by Congress), while tying such payments to "specific, observable performance metrics." The Special Master met all of these goals while working under intense media scrutiny and growing taxpayer unrest.
But the report, approved unanimously by the five members of COP, was not without criticism. The panel found that the general lack of transparency surrounding Feinberg's actions (see especially pages 80 to 82 of the report) made it impossible to critically appraise his efforts to permanently change Wall Street's pay practices.
The report claimed, for example, that although Feinberg promised to set executive pay at rates comparable to those of other companies, he was not clear about how he selected the peer companies he used for comparison purposes. He also rarely explained to the public how he managed to classify companies akin to those under investigation, or how he went about setting pay in the light of conflicting goals.
Some critics have also claimed that paying executives in stock could lure those stakeholders into taking unnecessary risks to raise the value of their own shares, slashing the very safety net such compensation was meant to provide the company. The report offered no specifics as to whether that had been the case among the seven companies.
Perhaps the most critical assessment of Feinberg's performance relates to his decision not to "claw back" any pay that went to financial executives in the boom period leading up to the financial crisis. Although he deemed $1.7 billion in pre-crisis compensation be "disfavored" and perhaps inappropriate, he claimed that none was "inconsistent with the public interest."
Hence, the anticipated feeding frenzy surrounding exorbitant executive pay at companies on the verge of collapse ended with a dull thud. In the end, not a cent was clawed back from any executive of the seven companies. That inability to act could itself guarantee that Wall Street's pay practices will never permanently change.
In a final section of the report dubbed "Additional Views," (pages 89-91) two member of the panel returned to the theme of the "too-big-to-fail" status of the seven companies, among others, that got substantial government aid. The panelists -- Professor Kenneth R. Troske of the University of Kentucky and attorney and Certified Public Accountant J. Mark McWatters -- reiterated the warning that such intrinsic backstops will usually encourage excessive risk-taking, "since [companies] can reap the benefits but will not suffer the consequences if the gambles are unsuccessful."
In the presence of these government guarantees, they wrote, "both shareholders and executives have an incentive to design compensation schemes that reward executives for investing in risky projects." If policymakers truly want to change the manner in which Wall Street executives are compensated, the U.S. government must show the willingness to allow "too-big-to-fail" companies to suffer the same vicissitudes as medium and small corporations and ultimately fail without bailout. Until that time, they agree, "both shareholders and executives will continue to push for compensation plans that reward executives for focusing on risky projects."
Regulators closed four more banks Friday, bringing the number of seizures so far this year to 18.
All four of the banks were located in different states. Both Wisconsin and Florida witnessed their second bank failures of the year, while Michigan and California each saw their first.
The most substantial bank to close its doors was Peoples State Bank of Hamtramck, Mich. First Michigan Bank, based in Troy, Mich., took over Peoples' 10 branches, along with its deposits and assets.
First Michigan entered into a loss-share transaction with the Federal Deposit Insurance Corp. on $331.0 million of the failed bank's assets. It agreed to pay the FDIC a premium of 0.25 percent for Peoples' $390.5 million in deposits.
Pacific Premier Bank of Costa Mesa, Calif., absorbed Canyon National Bank, of Palm Springs, Calif. That three-branch bank had $205.3 million in deposits and $210.9 million in assets.
Earlier Friday, The Florida Office of Financial Regulation closed the Fort Orange-based Sunshine State Community Bank. Premier American Bank, N.A. of Miami purchased essentially all of the bank's $125.5 million in total assets and took over its five branches. Premier will also pay a 0.50 percent premium to assume all of Sunshine's $116.7 million in deposits.
Royal Bank of Elroy, Wis., assumed all deposits and purchased all the assets of the single-branch Badger State Bank of Cassville, Wis. Badger held approximately $78.5 million in deposits and $83.8 million in assets.
The FDIC estimated that the group of closings would cost its deposit-insurance fund approximately $144.9 million.
Two of the banks were in Georgia, which has produced a steady stream of failures since the financial crisis began in 2008. The third was in Illinois, another of the hardest-hit states. All three institutions had been operating under regulatory enforcement orders.
The biggest bank to go under was American Trust Bank in Roswell, Ga. Renasant Bank, of Tupelo, Miss., took over American Trust's three branches and $222.2 million in deposits. It also acquired $147.4 million of the failed bank's $238.2 million in assets.
The FDIC retained the remaining assets for later sale.
BankSouth, of Greensboro, Ga., absorbed North Georgia Bank, in Watkinsville, Ga. That two-branch bank had $139.7 million in deposits and $153.2 million in total assets. The FDIC retained about $30 million of North Georgia Bank's assets.
Regulators also closed Community First Bank - Chicago. Northbrook Bank and Trust Co., based in the Chicago suburbs, took over Community First's sole branch, its $49.5 million in deposits and its $51.1 million in assets.
The FDIC said the closings would cost its deposit-insurance fund an estimated $116.4 million.
BCSB Bancorp Inc., the parent company of Baltimore County Savings, said Wednesday it had repurchased the $10.8 million in preferred stock it issued the Treasury Department when it got taxpayer aid through the Troubled Asset Relief Program in December 2008.
Fifth Third said it had completed a $1.7 billion stock offering, as part of its plan to repay $3.4 billion in TARP money and exit the program.
Washington Banking Co., based outside Seattle, retired its $26.3 million TARP debt earlier this month. Two banks in the Washington, DC area - Rockville Bank, of Rockville, Md., and United Financial Banking Cos., of Vienna, Va. - also repaid TARP money. Rockville Bank returned all of the $4.7 million it received in December 2008, while United Financial returned $3 million of the $5.7 million it got in early 2009.
Stockmens Financial Corp., of Rapid City, S.D., also has repaid $4 million of its $15.6 million in TARP aid, Treasury Department transaction reports show.
Three other banks that participated in TARP's Capital Purchase Program have repurchased the stock warrants they issued to the government as part of their aid packages.
Huntington Bancshares Inc. paid $49.1 million last week to buy back its warrants, while Susquehanna Bancshares inc. paid $5.27 million to do the same. First PacTrust Bancorp Inc. paid $1 million to repurchase its warrants and complete its exit from TARP.
Three of the closings were in Georgia, which has seen 21 banks and thrifts go under in 2010 and ranks second only to Florida in that department.
The biggest bank to fail was the Bank of Miami N.A., based in Coral Gables, Fla. Its three branches and $374.2 million in deposits were acquired by 1st United Bank, of Miami.
That bank also took all nearly all of Bank of Miami's $448.2 million in loans and other assets. The Federal Deposit Insurance Corp. agreed to share in any losses on $313.5 million of that amount.
The other banks that went under Friday were:
n United Americas Bank N.A., of Atlanta
n Chestatee State Bank, of Dawsonville, Ga.
n Appalachian Community Bank, of MacKaysville, Ga.
n First Southern Bank, of Batesville, Ark.
n Community National Bank, of Lino Lakes, Minn.
State Bank and Trust Co., of Macon, Ga., absorbed United Americas' two branches, $193.8 million in deposits and $242.3 million in assets.
Bank of the Ozarks, based in Little Rock, Ark., took over Chestatee State Bank's branches and business, while Peoples Bank of East Tennessee, in Madisonville, Tenn., absorbed Appalachian Community Bank.
Southern Bank, of Poplar Bluff, Mo., took over First Southern Bank's two branches, its $155.8 million in deposits and all $152.8 million of its $191.8 million in assets.
Farmers & Merchants Savings Bank, in Manchester, Iowa, took over Community Bank's branches, deposits and assets.
The FDIC said the six failures would cost its deposit insurance fund an estimated $267.6 million.
Sandy Spring Bancorp, the Olney, Md.-based parent company of Sandy Spring Bank, got $83 milion in TARP money from the Treasury Department in December 2008.
As Bailoutsleuth previously reported, Sandy Spring repaid roughly half of that money in July, as part of a two-pronged strategy for exiting the program. It made the second installment last week, repurchasing the last of the preferred stock that it had issued the government in return for taxpayer aid.
Sandy Spring made significant fiscal strides during the first six months of the year--conducting a successful common offering in the first quarter and turning a $5.1 million profit for the second quarter--and thus received regulators' approval to repay the first $41.5 million in aid.
The company announced Wednesday that it had repaid the final $41.7 million that it owed the government. The sum reflects the $41.5 million of original principal and $173,112 of accrued dividends. In a press release, Sandy Spring's chief executive, Daniel J. Schrider, said the decision to exit TARP reflected the company's strong capital position.
Sandy Spring made all the dividend payments on its TARP shares in a timely manner. The company hopes to repurchase the accompanying warrant from Treasury at fair market value, but said there was no guarantee that it would be able to do so.
First PacTrust, which is based in Chula Vista, Calif., and is the holding company for Pacific Trust Bank, also announced Wednesday that it had redeemed the $19.3 million in preferred stock it had sold to the Treasury in November of 2008. The move was made possible by a $60 million private placement completed on November 1, 2010.
First PacTrust paid nearly $2 million in dividends over the life of its participation in TARP. The Treasury still holds a warrant to buy 280,795 shares of First PacTrust's common stock at an exercise price of $10.31 per share, but the release made no mention of the company's intentions in that regard. First PacTrust's stock is trading for around $12.80 a share.
In what has come to be a rare note of gratitude from a TARP institution, Greg Mitchell, the company's chief executive and president, applauded those who helped the company through tough economic times. "We thank the U.S. government, our regulators and fellow taxpayers for their support and vote of confidence in our Company, and more broadly for their support of the U.S. financial system."
First Horizon National, parent company of the Memphis, Tenn.-based First Tennessee Bank, announced Monday that it planned to sell more than $250 million in common stock to help settle its tab with the Treasury. Two days later, the company unveiled the second leg of its exit strategy, announcing a public offering of senior notes.
First Horizon National said it intends to sell $500 million in notes. It plans to use the proceeds of the stock and note offerings to help repay its TARP obligations and retire roughly $100 million in other debt.
According to ProPublica, First Horizon has paid nearly $76 million in dividends to the government over the past two years. The company's communications have made no mention of its plans for the warrant it issued to Treasury along with its preferred stock in 2008.
Treasury sold 358,546,795 of its shares in GM as part of the IPO.
Treasury could earn an extra $1.8 billion from the deal if investors exercise an option to purchase additional shares of GM common stock. The government got its stock in return for the aid it provided the company through the Troubled Asset Relief Program
Santa Clara Valley Bank, which received $2.9 million through the Troubled Asset Relief Program in February 2009, received a cease-and-desist order from the OCC on Oct. 26. The Santa Paula, Calif.-based bank, which has three offices, had a net loss of $406,000 through the first half of the year.
The order requires the bank to develop a strategic plan, boost its capital ratios, implement an internal audit program, and address its problem assets, among other provisions.
Integra Bank N.A., based in Evansville, Ind., was issued a capital directive Aug. 12. Its holding company received nearly $83.6 million in taxpayer aid in February 2009.
The order said the bank, which has 55 offices, was not meeting capital levels that had been established in August 2009.
Now, regulators have ordered Integra to reach a total risk-based capital of at least 11.5 percent and a Tier 1 capital ratio of at least 8 percent.
As of June 30, its total-risk based capital ratio was 8.33 percent, and its Tier 1 risk-based capital was at 7.02 percent, according to regulatory records.
The bank is also required to develop a reasonable plan that would explain how it could reach those levels.
Through the first half of the year, the bank lost more than $60 million.
The biggest bank to go under was First Banking Center, of Burlington, Wis., with $664.8 million in deposits and $750.7 million in total assets. The Federal Deposit Insurance Corp. arranged for First Michigan Bank, of Troy, Mich., to take over the failed bank's 17 branches, all of its deposits and virtually all of its assets.
The Federal Reserve issued a "prompt corrective action'' order against First Banking Center in August, giving it 60 days to raise additional capital or find a buyer or merger partner.
First Michigan paid a 0.5 percent premium for First Banking Center's deposits, and the FDIC agreed to share in any losses on $516.6 million of the assets.
The other two banks shut down this week were Gulf State Community Bank, of Carrabelle, Fla., and Allegiance Bank of North America, based in Bala Cynwyd, Pa. Both of those banks also had been operating under regulatory orders.
Centennial Bank, of Conway, Ark., acquired Gulf State's five branches, along with its $112.2 million in deposits and $112.1 million in assets.
Centennial did not pay a premium for the failed bank's assets. It got a loss-sharing deal on $84.4 million of Gulf State's assets.
VIST Bank, of Wyomissing, Pa., took over Allegiance Bank, which had five branches, $92 million in deposits and $106.6 million in assets. It paid a 0.5 percent premium for the deposits, and the FDIC agreed to share losses on $86.2 million of the assets.
The FDIC said the three closings would cost its deposit insurance fund an estimated $199.5 million.
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According to the statement, the Committee on Standards of Official Conduct voted to send Waters' case back to its investigative subcommittee due to new evidence that could have affected the subcomittee's decision to refer the case to the full committee. As a result, the Nov. 29 trial won't be held, although presumably, it could be rescheduled.
The announcement came a day after the committee recommended that Rep. Charles Rangel (D-N.Y.) face censure.
Waters, a high ranking member of the House Financial Services Committee, is accused of using her influence in 2008 to help secure aid through the Troubled Asset Relief Program for struggling OneUnited Bank.
Waters' husband is a former board member at OneUnited and had between $250,000 and $500,000 worth of investments in the bank. That likely represented a conflict of interest, the committee has said.
Waters has repeatedly denied any wrongdoing.
The committee's report found that Waters may have violated conflict of interest laws when she contacted then-Treasury Secretary Henry Paulson to request that Treasury officials meet with representatives from a banking association. Ultimately, OneUnited was the only bank to be independently represented at the September 2008 meeting.
According to the report, Paulson said Waters did not mention OneUnited during her call, nor did she mention her financial interest in the bank.
"(T)he suggestion that I could gain personally from one phone call made to assist the National Bankers Association in getting a meeting with the Treasury Department is not credible," Waters said in a statement earlier this year.
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