Treasury Invests $28 Billion in Financial Institutions

The Treasury Department on Thursday released details regarding more than $27.9 billion invested in banks and financial institutions on Jan. 16 through the Troubled Asset Relief Program. The largest transaction for Jan. 16 involved $20 billion given to Bank of America Corp. (BAC) through the targeted investment program, while the smallest involved a $1.7 million injection in Oakland, Calif.-based privately-held Community Bank of the Bay through the capital purchase program (CPP). Transactions listed for Jan. 16 include a $20 billion capital injection in BofA, to help it absorb losses incurred from acquiring Merrill Lynch’s assets. It was the third transaction with BofA; the first occurred Oct. 28 when the bank received its initial $15 billion through the capital purchase program, while the second occurred much later, on Jan. 9, in the form of $10 billion originally earmarked for Merrill Lynch & Co. but deferred pending the merger and granted in BofA’s name after the acquisition completed Jan. 1. The final $20 billion purchase occurred under the targeted investment program, a relatively new vehicle originally established to give Citigroup Inc. (C) its second infusion (also $20 billion). Jan. 16 also saw Chrysler Financial Services Americas LLC — the financing arm of Chrysler Holding LLC — receive the promise of a $1.5 billion loan through the automotive industry financing program, which “will be incrementally funded,” according to the Treasury. Citi was also listed on the 16th as receiving up to $5 billion through a new asset guarantee program — part of a government loss-sharing initiative announced Nov. 23. The Treasury so far has allocated $193.8 billion through the capital purchase program and has nearly $56.2 billion left in the $250 billion originally reserved for the program through the first TARP installment. Accounting for all of the $250 billion spent — as interim assistant secretary Neel Kashkari and secretary Henry Paulson have repeatedly said “thousands” of CPP applications await review — and including loans and asset guarantees, the Treasury has spent approximately $355.8 billion through TARP so far. The rise of the privately-held institution The Treasury on Nov. 17 released information regarding the participation of privately-held financial institutions in the TARP, and the number of transactions with privately-held firms within the CPP has grown ever since. The data reported Thursday shows that of the 42 transactions made Jan. 16, 39 were made under the CPP. Of those 39 injections, 20 were made to privately-held institutions. This ratio — more than 51 percent — of injections given to private firms over publicly-traded institutions marks the first date the daily TARP fund provisions favor private firms in the CPP. The data show that transactions taking place at privately-held firms accounted for 37 percent of CPP transactions made on Jan. 9, while they made up 46.5 percent of CPP transactions on Dec. 23 and only 28.5 percent of CPP transactions on Dec. 19. In other words, the participation of private firms in TARP as a percentage of regular transactions has nearly doubled (from 28.5 percent to 51 percent) in a month. The percentage of funds granted to private institutions is significantly lower overall simply because of the reach of those institutions. Write to Diana Golobay at Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.

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