TARP Approval May Hinge on Use of Funds for Lending

Congressional approval for the second $350 billion installment of TARP funds may depend on the Treasury Department's ability to show that banks are actually using their government investment money to make new loans, House Financial Services Committee chairman Barney Frank, D-Mass., said Wednesday. At a House hearing lawmakers lambasted TARP chief Neel Kashkari and his agency for not adopting the FDIC's loan modification model and pulling a "bait and switch" on Congress by abandoning their stated early goal of buying troubled mortgages in favor of making preferred stock investments in banks. Mr. Kashkari, an assistant secretary at Treasury, said his boss, Henry Paulson, has made no decision on when he will ask for the remaining $350 billion. To date, 87 banks in 30 states have received government investments under the $700 billion Troubled Asset Relief Program. Members of the House Financial Services Committee complained that there is no requirement for the recipients to increase their lending and no mechanism to measure it.