Update: White House does not know how TARP funds were used
House Domestic Policy Subcommittee plans probe of TARP funds
Ohio Democratic Congressman Dennis Kucinich wants to know: "If [the Troubled Asset Relief Program] isn't about keeping people in their homes or providing credit to businesses, what is it for?"
Expressing his frustration before the Government and Oversight Committee, the two-time presidential candidate suggested that the Federal Reserve may be paying banks to hoard money and avoid making loans.
Before the committee — which assembled Tuesday to hear the testimony of Neil Barofsky the Special Inspector General for TARP, along with Federal Reserve Chairman Ben Bernanke — Kucinich wondered aloud if "banks are parking a historic amount of taxpayers' money in the Federal Reserve while the businesses and consumers across America are starved for credit," and whether the Federal Reserve is paying banks to avoid making loans.
"Is the Fed paying banks NOT to loan money?" a Kucinich media advisory pondered.
To support his line of questioning, he cited a Bloomberg report which noted that "banks' excess reserves at the Fed rose to a record $877.1 billion daily average in the two weeks ended May 20, from $2 billion a year earlier.
"Excess reserves — money available for lending that banks choose to leave with the Fed instead — averaged $743.9 billion in the first two weeks of this month," the report continued.
"First, Congress was told that TARP was for the purchase of toxic assets, to help keep people in their homes," the Congressman said. "Then the Bush Administration switched the program. Next, Congress was told that the TARP funds were instead needed to bail out the banks, in the form of a direct capital infusion, to keep credit markets alive."
He continued: "If TARP isn't about keeping people in their homes or providing credit to businesses, what is it for? I think the vast majority of Americans would be outraged to learn their tax dollars were facilitating hoarding at the Fed and increased profit making for banks."