The Wall Street Journal reports on what everyone already knows: the federal bailout serves as nothing more than a political payoff machine. As long as lenders have friends in Washington, they’ll get TARP funds, regardless of how they’ve run their bank or their current health as a lender. Barney Frank leads the pack in the new version of pork:
Troubled OneUnited Bank in Boston didn’t look much like a candidate for aid from the Treasury Department’s bank bailout fund last fall.
The Treasury had said it would give money only to healthy banks, to jump-start lending. But OneUnited had seen most of its capital evaporate. Moreover, it was under attack from its regulators for allegations of poor lending practices and executive-pay abuses, including owning a Porsche for its executives’ use.
Nonetheless, in December OneUnited got a $12 million injection from the Treasury’s Troubled Asset Relief Program, or TARP. One apparent factor: the intercession of Rep. Barney Frank, the powerful head of the House Financial Services Committee.
Mr. Frank, by his own account, wrote into the TARP bill a provision specifically aimed at helping this particular home-state bank. And later, he acknowledges, he spoke to regulators urging that OneUnited be considered for a cash injection.
Show of hands for who’s surprised by this. TARP actually works better than pork; it gets more dollars to the politically connected and gets the money there faster. Nor is this limited to Democrats, although Frank’s support of OneUnited despite their failure to qualify might be the most egregious example. Alabama has received $3.7 billion in TARP funds for four of its lenders, and state banking officials credit their two Republican Congressmen for getting them their share.
Who’s watching for abuses? No one. Treasury has so far declined to explain their reasoning on how they spend TARP, and Congress keeps giving them more money anyway. Even regulators don’t know how the system works. Some banks get cash, while others get told to pound sand, even though they have healthier balance sheets than the lucky recipients. The only conclusion anyone can reach is that some states have more political leverage in Washington than others.
The WSJ has a state-by-state breakout the distribution of federal TARP monies here. Be sure to read the entire WSJ report.
Update: That should have been Alabama’s Republican Congressmen, not Senators. My apologies for the error.