Monday, December 22, 2008

Where Is Our Money?

According to the Associated Press (AP), the banks will not say what they are doing with the taxpayer bailout money they have received. Basically, the $700 billion Troubled Asset Relief Program (TARP) is a bank loan on steroids. Banks who received loans in the billions of dollars are saying things like “We've lent some of it. We've not lent some of it,” according to a spokesperson for JPMorgan Chase, which received $25 billion. “We have not disclosed that to the public. We're declining to."

Need I ask what is wrong with that picture? A business management consultant by trade, I am used to preparing banking presentations and helping my clients ask for business loans. I can guarantee you that one of the most important questions that banks ask is, “What are you going to do with the money?” I can also guarantee you that answering, “We're choosing not to disclose that," would get me and my client shown the door, but that is what Bank of New York Mellon said and they received about $3 billion.

If you ever wondered why the Federal government is not in the banking business, here is a little insight. Just ask the Treasury department what it is doing to monitor the spending of those TARP billions. It is a fair question, right? Now ask yourself what you would think if you got an answer like this one: "What we've been doing here is moving, I think, with lightning speed to put necessary programs in place, to develop them, implement them, and then we need to monitor them while we're doing this. So we're building this organization as we're going."

You might think that your question had been answered by Sarah Palin.

However, it is much worse than that. For the record, those are the words of Treasury Secretary Henry Paulson. After all, he was the banker who put the rush job on Congress, which at last look was part of the same Federal Government and is not in the banking business.

For argument’s sake, let’s overlook the “lightening speed” bit and focus on Paulson’s central point. If he had said “We are making it up as we go,” he would be telling the truth. It would also explain why Geo. Bush picked him. We can only hope that before the next $350 billion is released in the next administration, Tim Geithner will have a plan he can show to congress, which must confirm him to replace Paulson.

Tax payers deserve more in the way of policy than “making it up as we go.” Banking’s top executives deserve to be shown the door. As to being paid bonuses on their way out, to quote one of their spokespersons, “We’re declining to.”

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