Newsflash: Treasury Lied To You

October 7th, 2009 by alyx · 1 Comment · hank paulson



Neil Barofsky starts ripping Treasury a new one. Sounds like they withheld $10 bn in bailout funds from BAC after allocating it to Merrill in order to force that merger to come to fruition, which is inconsistent when you consider Wells was given all of the $25bn standard “large failbank” allotment before eating up Wachovia, and that these banks weren’t so healthy after all (shocker):

By size, Citigroup, JPMorgan Chase and Bank of America could have qualified for more, and the first two received $25 billion. But Bank of America was given only $15 billion in October, since Merrill Lynch was earmarked for $10 billion. The two companies agreed to a merger, though their deal had not yet been approved by regulators or shareholders.

Another company in the process of a merger was not treated the same. Wells Fargo was acquiring Wachovia, and it received both companies’ money at the start, according to the inspector general.

Mr. Barofsky’s office also says that regulators were wrong to tell the public last year that the earliest bailout recipients were all healthy. In truth, regulators were concerned about the health of several banks that received that first bailout, the inspector general writes.

I guess it’s not just that. There was a mystery failbank! WSJ finds a buried gem, a whodunit, if you will:

What’s intriguing about this one line buried in the 50-page report is Paulson’s suggestion that an institution other than Bank of America and Citigroup, which have not paid back TARP, was near death. And yet a year later, that bank still is unidentified, even though, having paid back the taxpayer funds, it has received the government’s imprimatur as to its balance-sheet health.

That parenthetical clause narrows that list to five institutions: J.P. Morgan Chase, Goldman Sachs Group, Morgan Stanley, Bank of New York Mellon and State Street.

So who is so big that they are The Failbank That Cannot Be Named? Hmm? There were rumors swirling around pretty much all of these other than the golden child that was JPM, so I don’t know.

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