Treasury Pays $33.56B To 21 Banks, Next Round Of Applications Open

WASHINGTON — The government said Monday it has supplied $33.56 billion to 21 banks in a second round of payments from the $700 billion rescue program, and announced a deadline for another 3,800 banks to apply for funds.

The Treasury Department said a category of privately held banks will have until Dec. 8 to apply for the government to purchase shares of their stock as a way to bolster their balance sheets. The deadline for the larger publicly traded banks was Nov. 14.

The new Dec. 8 deadline will apply to about 3,800 banks that are so-called C-Corps institutions for the part of the tax code that applies to them. Another 2,500 S-Corps institutions also will be able to apply for money, but Treasury has not set the deadline for their applications.

The new deadline was announced as Treasury confirmed a second round of government stock purchases that follow the initial $125 billion it allocated to nine of the country's largest banks. The rescue program now has earmarked payments of $158.56 billion to banks.

Treasury Secretary Henry Paulson announced last week the administration was abandoning the initial centerpiece of the rescue program, the purchase of troubled mortgage-backed securities from banks in an effort to bolster their balance sheets.

That was the only program Paulson mentioned as Congress debated the rescue package, which was approved on Oct. 3. However, Paulson later said the severity of the financial crisis made him realize it would take too long to get the troubled asset program into operation.

In its place, he announced on Oct. 14 that the government would buy shares of bank stock as a way to quickly inject fresh capital into the institutions.

He pressured nine of the largest banks to participate in the program during an Oct. 13 meeting at the Treasury Department, arguing that they should go along with the idea to remove the stigma other banks might feel in getting money from the government.

The rescue program has drawn a significant amount of criticism from lawmakers who have objected to the sudden switch in emphasis and what they see as a lack of restrictions on the funds. The critics contend that banks can simply hoard the fresh capital or use it to pay dividends to their shareholders or acquire other institutions rather than using it to boost their lending.

Paulson and Federal Reserve Chairman Ben Bernanke are scheduled to testify Tuesday before the House Financial Services Committee to answer questions that have been raised about the bailout program.

The Treasury announcement on Monday said the largest stock purchase in the second round was $6.6 billion paid to U.S. Bancorp of Minneapolis. The smallest stock purchase was $9 million paid to Broadway Financial Corp. of Los Angeles.

Many of the banks in the second group of 21 already announced that the government was purchasing stock after they had reached preliminary agreements. Treasury does not make any announcement until after the final legal documents are signed, a process that can take a month from when the preliminary agreements are reached.

The department noted that the $10 billion scheduled to be paid to Merrill Lynch & Co. has been deferred pending the completion of that company's acquisition by Bank of America Corp.

Comments

[PhilipTaylor]

Where is he getting all this MONEY? Paulson said he is not going to TAKE another Dime for Financial Bailouts so we can RELAX on that! Then where is this money coming from - Tranche 1 or is he already getting Tranche 2?

He is OK in FUNDING Big Banks Mergers to form MEGA-BANKS that stifle competition? Right?
To him Playing with Financial Paper to make PROFITS beats MAKING THINGS to Build Wealth?
What has our Economy Become? A HOUSE OF PAPER CARDS that is Crashing!

Democrats can pass this bill but not necessarily override the veto!
We must show that the Bush Administration is willing to sacrifice the financial safety and security of 18,000,000 people (4 x 4.5 million) for a less than 4% share of the $700 Billion Bailout package!
This should be Largest and perhaps Final "Black-eye" for Bush and Company!

[aspecialed]

Why use the word PAY? They didn't do anything to earn this money. It's a LOAN.

[OB-GYN]

I want to see a list of these banks as well as the Treasury wording on golden parachutes executive pay, year-end employee bonuses, and the Treasury's language against mergers/ac­quisitions with these taxpayer TARP dollars. I'd like to see the preferred stock deals for the Treasury in the banks, and the interest rate of treasury loans which may be returned to the US people.

Some transparency here please?

[chelsea4]

I don't understand why we are helping financial institutions like American Express . They want tax payers money to help bail them out. But, behind the government back, they are raising peoples who have good credit scores over 840 interest rate to the max 27%, because they were late 2 days on their monthly payment. Why should we help them, when they are not in the American people’s corner ?