November 2008 Archives

The nomination of federal prosecutor Neil M. Barofsky to become special inspector general of the Treasury Department's $700 billion bailout program did much to quell critics who were concerned about a lack of government oversight.

But U.S. Sen. Christopher Dodd, head of the Senate Committee on Banking, Housing and Urban Affairs, disclosed in a little-noticed statement that at least one other member of the Senate is blocking a vote on Barofsky's confirmation.

"That delay is regrettable and not in the best interest of American taxpayers,'' Dodd said. "It is my sincere hope that those who are blocking this nomination will reconsider their actions and confirm Mr. Barofsky at the earliest opportunity."

Dodd, a Democrat from Connecticut, did not identify the senator who was blocking the vote, but did say that the person was a Republican. Under Senate rules, any member can put a hold on any federal appointment. They can do so anonymously, and for any reason.

Dodd added that Barofsky's appointment had been cleared by the Senate Banking Committee, leaders of the Senate Committee on Homeland Security and Government Affairs, and by all Democratic senators.

Barofsky currently is an assistant U.S. attorney for the Southern District of New York and is chief of that branch's mortgage fraud group. The district includes Manhattan, which is home to many of the big financial services companies that have received billions of dollars in taxpayer money through the Treasury Department's rescue efforts. The district also is home to some of the companies that are under investigation in connection with their activities before and during the current financial crisis.

Although President George W. Bush nominated Barofsky for the inspector general position, news stories after the nomination noted that Barofsky supported Barack Obama in this year's election.

Reports that someone was blocking a vote on Barofsky's nomination appeared first on  Internet sites, including one run by the Project on Government Oversight. Dodd's remarks have received little attention from newspapers, television network or other mainstream media outlets.

BailoutSleuth will continue monitoring Barofsky's confirmation process and provide updates on any significant developments.

Our routine search of Securities and Exchange Commission filings by banks seeking additional capital through the Treasury Department turned up two more institutions that won federal approval last week.

Both are based in Virginia. Collectively, they will sell as much as $87 million in preferred stock to the Treasury Department.

Virginia Commerce Bancorp Inc., which has headquarters in Arlington, Va., will get $71 million in taxpayer money. The bank reported last month that its earnings for the third quarter were down 60.9 percent from the previous year, in part because of higher charge-offs for troubled real estate loans.

The bank raised $25 million through private channels in September and is seeking to raise an additional $25 million.

"While we are well-capitalized beyond regulatory guidelines, the addition al capital provided by the Treasury's Capital Purchase Program will further strengthen our position and allow us to provide much needed credit to businesses and consumers throughout our market," said Peter A. Converse, the company's chief executive officer.

The Treasury Department announced in October that it would inject $250 billion into U.S. banks by purchasing preferred stock that pays annual dividends of 5 percent a year for the first five years and 9 percent thereafter. So far, the agency has approved investments in roughly 120 banks. The money is part of the $700 billion Troubled Asset Relief Program approved by Congress and President George W. Bush.

Valley Financial Corp., of Roanoke, Va., said it would get $16 million through the program. The company's earnings for the third quarter and first nine months of the year were both slightly higher than the comparable figures for 2007. Valley Financial said the additional capital would add to its already strong capital position and help it better serve customers in its region.

The Treasury Department has approved 13 more banks for its share purchase program. The latest group of recipients will split roughly $1.15 billion in taxpayer money.

Whitney Holding Corp., which has headquarters in New Orleans, got the biggest chunk of money. It was cleared to sell $301 million in preferred stock to the government. Whitney said last month that its earnings for the third quarter were off nearly 85 percent from the same period a year earlier, largely because of provisions for losses on real estate loans in Florida.

Wintrust Financial Corp., based in Lake Forest, Ill., will get $250 million. Wintrust is the holding company for 15 Midwestern banks and as a mortgage company. The company had a loss of $2.44 million for the third quarter, compared with a profit of $9.92 million a year ago. Wintrust also raised $50 million in a private stock sale in August.

National Penn Bancshares Inc., of Boyertown, Pa., was cleared to receive $150 million in taxpayer money. It reported a 14.4 percent increase in earnings for the third quarter, even with a $13 million writeoff on the value of what it called a "synthetic collateralized debt obligation.''

Pinnacle Financial Partners, which has headquarters in Nashville, Tenn., was approved for $95 million in capital. Another company in that state, Green Bancshares, of Greeneville, will get $72.3 million.

TowneBank, of Suffolk, Va., said its plans to sell $76.5 million in stock to the Treasury Department. NewBridge Bancorp., which is based in Greensboro, N.C., will get $52 million. The Bancorp Inc., of Wilmington, Del., $45.2 million.

The Treasury Department has picked 10 more banks to receive taxpayer money as part of its financial-services industry rescue efforts. The total amount they will receive through stock sales to the government is roughly $606 million.

Sterling Financial Corp., which is based in Spokane, Wash., said the Treasury Department had approved its request for $303 million in capital. Sterling has branches in five western states, and also has two mortgage subsidiaries that make real-estate and commercial loans. The company reported last month that earnings for the first three quarters of the year were off nearly 75 percent from a year ago, primarily reflecting increases loss provisions on its real-estate loans.

Independent Bank Corp., of Ionia, Mich., is getting $72 million in taxpayer funds. The bank posted a $5.3 million loss for the third quarter -- in part because of a writedown on its stock in Fannie Mae and Freddie Mac -- putting it into the red for the year.

Center Financial Corp., a Los Angeles bank that serves the Korean-American community, will get $55 million from the Treasury Department. The bank reported a loss in the third quarter after booking $15 million in charges for the settlement of litigation bought by a group of Korean Banks and a Korean import-export agency.

Fidelity Southern Corp., based in Atlanta, said it was approved to sell $48.2 million in preferred stock to the government. The bank holding company has quadrupled its loan-loss reserves, producing losses for the third quarter and first nine months of 2008.

The Treasury Department is providing $250 billion in capital to banks as part of the broader $700 billion Troubled Asset Relief Program approved by Congress last month. Under the plan, the banks sell preferred stock that pays annual dividends of 5 percent for the first five years and 9 percent thereafter. The government also will receive warrants to buy common stock in the institutions, which could provide returns to taxpayers if the shares increase in value.

First Defiance Financial Corp., of Defiance, Ohio, will get $37 million in fresh capital from the Treasury Department. The bank has remained solidly profitable despite some hits to its asset base. Tennessee Commerce Bancorp, which has headquarters in Franklin, Tenn., said it would get $30 million.

VIST Financial Corp., based in Wyomissing, Pa., will get $25 million. Unity Bancorp, of Clinton, N.J., will receive $20.6 million.  American River Bankshares, of Sacramento, will get $8 million, and Central Federal Corp., of Fairlawn, Ohio, will get $7.23 million.

Citigroup Inc. is getting $20 billion in additional government financing, in a bailout plan that buys the bank time without wiping out the investments of common and preferred shareholders.

The joint rescue effort announced Monday by the Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corp. also calls for the government to guarantee some $306 billion in troubled assets.

Citigroup will be responsible for only the first $29 billion in losses on the portfolio, which consists mainly of loans and securities backed by residential and commercial real estate, and related hedges. According to the term sheet for the deal, the Treasury Department would absorb the next $5 billion in losses, through the $700 billion Troubled Asset Relief Program passed by Congress last month.

The FDIC would bear the third round of losses, up to $10 billion. The summary does not say what would happen in the event of further losses, but the terms suggest that taxpayers could be on the hook for as much as $277 billion in the unlikely event that the assets become completely worthless.

Citigroup said the arrangement would free up $16 billion in capital. Although the government is guaranteeing the assets, they will remain on Citigroup's books. The guarantees will last for 10 years on assets backed by residential real estate and five years on assets backed by non-residential property.

Now that the Treasury Department has parceled out most of the $250 billion it plans to invest in U.S. banks, BailoutSleuth will be taking a closer look at which institutions are getting capital injections, and why.

Since we started posting summaries of the banks whose applications for the Treasury Department program were approved, we've been getting tips about certain situations involving some of those companies.

We'd like BailoutSleuth readers to help us further by providing ground-level reports on economic conditions in the markets served by the banks that are receiving public money. If you know of any major business bankruptcies, failed real-estate projects or mass layoffs that could have a bearing on those banks, we'd like to hear about them.

If you know of any unusual or extravagant spending by those institutions, we'd like to hear about that, too.

Please send your tips to chris@sharesleuth.com.

BailoutSleuth has updated its master list of banks that have been approved to receive taxpayer money through the Treasury Department's capital purchase program.

We've now identified 95 banks that have been picked to sell preferred stock to the Treasury Department as part of its plan to inject new capital directly into financial institutions to strengthen their balance sheets and stimulate lending.

The total amount of money approved for the banks is approaching $180 billion, a figure that does not include the $40 billion that the Treasury Department has pledged to American International Group Inc., the big insurance and investment firm.

Some of the new banks on the list announced their approval yesterday. They include Ameris Bancorp., a bank in southern Georgia that will get $52 million from the government, and Home Bancshares Inc., of Conway, Ark., which will get $50 million.

BailoutSleuth's updated roster also includes several banks that did not put out press releases announcing their participation, but simply noted it within larger Securities and Exchange Commission filings.

Keep reading to see the master list.

The Federal Deposit Insurance Corp. has agreed to guarantee as much as $1.4 trillion in loans that banks make to one another, adding to the potential cost of the government efforts to stabilize the financial-services industry.

The measure approved Friday by the FDIC's directors is designed to spur lending between banks, and is part of the Temporary Liquidity Guarantee Program launched in  mid-October.

According to the FDIC's announcement, the guarantee plan covers the newly issued senior unsecured debt of banks, savings and loans and certain types of holding companies. It also provides full coverage of non-interest-bearing transaction accounts.

The guarantees apply to any interbank borrowing of more than 30 days, which are issued on or before June 30, 2009. The guarantees will run until the debt matures or until June 30, 2112, whichever is earlier.

On the same day the FDIC's directors approved the plan, government regulators shut down three banks and savings and loans -- the biggest one-day total since the financial crisis began.

Federal authorities seized Downey Savings and Loan in Newport Beach, Calif., and PFF Bank & Trust of Pomona, Calif. US Bancorp took over the deposits and loans of both institutions in deals arranged by the FDIC and the Office of Thrift Supervision.

Regulators also closed Community Bank of Loganville, on the eastern edge of the Atlanta metropolitan area. Community Bank was the third Atlanta-area bank to fail in the past three months.

Ten more banks have announced their participation in the Treasury Department's $250 billion capital purchase program, pushing the total number of institutions that have been selected to receive taxpayer money beyond 70.

The total allocation for the 10 new banks on the list was $1.4 billion.

M&T Bank Corp., a Buffalo, N.Y.-based bank with operations in New York, New Jersey, Pennsylvania, Virginia and several other states, was approved to sell $600 million in preferred stock to the government. 

Susquehanna Bancshares Inc., of Lititz, Pa., will get $300 million in capital through the Treasury Department program.

Susquehanna concluded that participating in the program would benefit customers, shareholders and the communities that the company serves, said William J. Reuter, chairman and chief executive.

"Susquehanna Bank has continued to see strong loan growth throughout this year, and we are fortunate to be well-capitalized, with sufficient liquidity to meet customers' needs,'' Reuter said in a prepared statement. "The additional capital we receive through this program will broaden our ability to meet ongoing loan requests from our customers. In addition, it positions us to be able to make strategic investments for the future growth of our regional banking operations.''

Boston Private Financial Holdings Inc. will get $150 million in capital through the program. That comes on top of the $173 million the banking company raised in July from private investors, including the Carlyle Group, a large private equity fund.

CVB Financial Corp., of Ontario, Calif., said it was approved for $130 million in investment by the Treasury Department. Sandy Spring Bancorp, based in Olney, Md., will get $83 million.

In return for the money, the banks are issuing the Treasury Department preferred stock that pays dividends of 5 percent a year for the first five years and 9 percent thereafter. The funding deals also include warrants to buy common stock, which could provide a return to taxpayers of the shares increase in value over time.

The $250 billion being dispensed to the banks is part of the $700 billion financial-services industry bailout plan approved by Congress last month.

Wilshire Bancorp of Los Angeles said it plans to sell $62 million in preferred shares to the government. LNB Bancorp Inc., based in Lorain, Ohio, is getting $25.2 million, and Wainwright Bank & Trust Co. is getting $22 million

Indiana Community Bancorp, which has headquarters in Columbus, Ind., was approved for $21.5 million in public money. HopFed Bancorp Inc., of Hopkinsville, Ky., got $18.4 million.

At least eight more banks announced their participation in the Treasury Department's share purchase program in the past two days, adding roughly $1.48 billion to the total amount of taxpayer money to be invested in the institutions.

Popular Inc., the parent company of Puerto Rico's Banco Popular, said the Treasury Department had approved its application to sell as much as $950 million in preferred stock to the government.

Popular reported a $668.5 million loss for the third quarter, which included a charge for the sale of certain mortgage operations to Goldman Sachs Group Inc. The company said last month that it would close more than a fourth of its U.S. branches and lay off a third of its U.S. workforce.

Cathay General Bancorp, of Los Angeles, was approved to sell $258 million in stock. The company was launched in 1962 to provide banking services to Chinese Americans. Its network now extends to New York, Texas, Massachusetts and Washington.

Superior Bancorp, of Birmingham, Ala., announced that it would receive $69 million. Great Southern Bancorp, which has headquarters in Springfield, Mo., said it was approved for $60 million.

The stock purchases by the Treasury Department are part of the $250 billion in capital that the government is injecting into the banking system in an attempt to strengthen balance sheets and stimulate lending.

By our reckoning, at least $175 billion of that money has already been allocated.

Capital Bank Corp., based in Raleigh, N.C., will get $42.9 million from the Treasury Department, while Southern Community Financial Corp., of Winston-Salem, N.C., will get $42.75 million.

Severn Bancorp, based in Annapolis, Md., was approved for $30 million in taxpayer investment. Bancorp Rhode Island Inc., of Providence, R.I., said it also would get $30 million.

Iberiabank Corp. said the Treasury Department had approved its application to sell up to $115 million in preferred stock to the government. But the bank holding company, based in Lafayette, La., said its management and board still had not decided whether to go ahead with that transaction.

Seven top executives of Goldman Sachs Group Inc. have asked to forego bonuses for 2008, and the big Swiss bank UBS said its highest-ranking managers also would have to settle for only their salaries this year.

The banks announced the moves after interest groups and some member of Congress raised questions about the propriety of Goldman Sachs and other companies paying billions in year-end bonuses after taking financial aid from the government.

Goldman Sachs got $10 billion in taxpayer money from the Treasury Department last month as part of the government's plan to inject capital into U.S. financial institutions and unfreeze the credit markets.

Although the company's chief executive, Lloyd C. Blankfein, won't be getting a bonus on top of his $600,000 base salary, he should have little trouble making ends meet. His combined salary and cash bonuses for the past four years totaled $90 million.

Goldman Sachs' co-presidents, Gary D. Cohn and Jon Winkelried, each had $54 million in combined salary and cash bonuses over the two previous years, according to the company's SEC filings.

Goldman Sachs has been one of Wall Street's strongest performers in recent years, and its compensation levels have reflected that success. However, its profits for the first nine months of 2008 were off 70 percent from the same period last year.

UBS said that, in addition to eliminating executive bonuses this year, it was adopting a new compensation scheme. According to a summary, the company is changing to a long-term model in which variable compensation such as bonuses will depend on sustained performance.

UBS said a substantial portion of the bonuses will not be paid immediately, but will be held by the company and remain at risk, subject to future results.

New York's attorney general, Andrew Cuomo, suggested that Citigroup Inc. also should cancel bonuses for executives this year. The company said Monday it plans to cut 52,000 jobs over the next year.

"As Citigroup suffers, so too do investors, employees, and taxpayers,'' Cuomo said in a prepared statement. "At the very least, Citigroup should follow Goldman Sachs' lead and announce quickly that top executives will not be receiving bonuses this year. Citigroup's stated intention to wait until the new year to make its bonus decisions is a mistake. After four consecutive quarterly losses, it seems only fair that top executives should shoulder their fair share of these difficult economic times.''

Citigroup got $25 billion in funding from the Treasury Department last month.

We've received many visitors in the past few weeks through our guest appearances at other media outlets.

Here are a few of the links to those appearances, for anyone who wants to check them out.

Mark Cuban, the founder and financial backer of BailoutSleuth, discusses the bailout and the site on NPR's "Planet Money" podcast:

http://www.npr.org/blogs/money/2008/10/hear_mark_cuban_checks_in.html

Chris Carey, editor of BailoutSleuth, discusses the use of taxpayer money in the bailout with CNNMoney.com:

http://money.cnn.com/video/#/video/news/2008/11/14/news.bailout.sleuth.cnnmoney

(link may need to be copied and pasted in new window)

Chris Carey discusses the bailout and BailoutSleuth on Dan Rea's "Nightside" talk show for WBZ-AM in Boston:

http://multimedia.wbz.com/m/audio/21415718/where-is-the-taxpayer-bailout-money-going.htm?q=Dan+Rea

Eight banks announced Friday that they would be receiving a total of $2.07 billion from the Treasury Department through the government purchase of newly issued shares.

Synovus, which has headquarters in Columbus, Ga., said it would receive $973 million in taxpayer money. That bank, the second-largest in Georgia, had originally said it would seek up to $900 million in capital through the program.

The Treasury Department approved The South Financial Group, of Greenville, N.C., to sell $347 million in preferred stock to the government. It chose the bank despite concerns that the company's founder and chief executive abruptly moved up his retirement date, leaving with a so-called "golden parachute'' package worth an estimated $18 million.

South Carolina's governor, Mark Sanford, has asked the Treasury Department to investigate the move, which came just before the bank applied to participate in the $700 billion Troubled Asset Relief Program. The rules of that program penalize such payouts.

Some readers have asked why BailoutSleuth keeps publishing these roundups of banks that were chosen for government aid. We're doing it because the Treasury Department is not. That agency has taken the position that it will disclose the investments only after the money changes hands - a policy that makes it harder for the public to raise objections.

Our lists come from press releases issued by participating banks. East West Bancorp, of Pasadena, Calif., said Friday that it will sell $316 million in preferred stock to the Treasury Department. That bank focuses primarily on Asian-American businesses and consumers.

Citizens Republic Bancorp, of Flint, Mich., was approved for $300 million in Treasury Department money. Eastern Michigan is one of the nation's foreclosure capitals, and Citizens Republic has been hurt by souring commercial and residential real-estate loans.

Nara Bancorp of Los Angeles was approved for $67 million, and Peoples Bancorp , based in Marietta, Ohio, got $39 million.

First 1^st Financial Services Corp., of Hendersonville, N.C. got $16.3 million from the Treasury Department, while Broadway Financial Group of Los Angeles got $9 million. Both of those banks said that they had already completed the share sales.

In another twist in the maneuvering for federal aid, four insurance companies have announced deals to buy savings and loans. The acquisitions would enable them to seek some of the $250 billion that the Treasury Department has allocated for stock purchases in financial institutions.

The insurers hoping to gain access to government money via that route are Hartford Financial Services Group, Lincoln Financial Group, Genworth Financial Inc. and Aegon NV., the Dutch parent of Transamerica.

Hartford said it would seek as much as $3.4 billion in capital from the Treasury Department. The others did not specify how much they might seek. Aegon has already received $3.8 billion in capital from the Dutch government.

Another wave of banks announced their participation in the Treasury Department's  capital investment program, as some even bigger financial-services companies readied their requests for federal aid.

FirstMerit Corp. of Akron, Ohio, said Wednesday that it had been approved for $248 million in Treasury Department money. Western Alliance Bancorporation of Las Vegas said it would get $140 million.

Signature Bank, announced that its previously disclosed request for $120 million also had been granted. And Taylor Capital Group Inc., which has headquarters in Rosemont, Ill., said it would get $105 million.

The Treasury Deparment plans to inject $250 billion in capital into banks and other financial companies through the purchase of preferred stock. The shares pay dividends of 5 percent for the first five years and 9 percent thereafter. The Treasury Department also gets warrants to buy common stock of those companies, which could produce a profit for taxpayers if the shares ultimately rise in value.

The money for the investments is coming from a $700 billion pool created by Congress for the Troubled Asset Relief Program, or TARP. The deadline for applications is Friday.

Porter Bancorp Inc., of Louisville, Ky., announced that it had been approved to sell $39 million in preferred stock to the Treasury Department. Encore Bancshares Inc., based in Houston, will get $34 million.

First PacTrust Bancorp Inc., of Chula Vista, Calif., said it would receive $19.3 million in capital. Bank of Commerce Holdings Inc., of Redding, Calif., confirmed that it would get  $17 million through the program.

Those five deals would represent an additional $722.3 million in spending under the TARP program.

Meanwhile, CIT Group Inc., a big commercial finance company, announced that it had applied to the Federal Reserve to become a bank holding company. CIT added that it would seek money from the Treasury Department through the TARP program.

"As the bridge between Wall Street and Main Street, CIT remains one of the few significant sources of liquidity for small and mid-sized businesses who are struggling to survive in today's challenging environment," said Jeffrey M. Peek, the company's chairman and chief executive.

American Express Co..'s conversion to a bank holding company was approved on an expedited basis by the Federal Reserve. The company reportedly asked the Treasury Department for $3.5 billion.

Raymond James Financial Inc., an investment and financial services company in St. Petersburg, Fla., also has asked for approval to make the switch.  

Treasury Secretary Henry M. Paulson Jr. confirmed Wednesday what was already becoming apparent -- that the government will not use any of its $700 billion financial-industry bailout fund to buy toxic assets from banks and other institutions.

Those purchases were the basis of the Troubled Asset Relief Program that Congress approved last month. The argument was that removing distressed assets such as mortgage-backed securities from the books of those companies would ease fears about their solvency, free up capital, encourage lending between companies and thaw a frozen credit market.

But in a quick turnabout, the Treasury Department has decided that making direct capital investments in banks is a better way to stimulate lending.

The Treasury Department has already approved the purchase of $170 billion in preferred stock in more than 40 financial institutions. The bulk of that money, $125 billion, was allocated to nine large banks that have already received their cash.

American International Group Inc., the big insurance company, will get $40 billion from the fund under a revised rescue plan announced Tuesday. That investment -- the biggest yet under the program -- means that $165 billion of the relief fund will go to just 10 companies.

The benefits of the program will be further concentrated by the pending merger between Bank of America Corp., which got $15 billion from the TARP fund, and Merrill Lynch & Co., which got $10 billion.

What's more, billions in additional money that AIG received from the Federal Reserve as part of a broader $150 billion rescue package likely were likely paid out to some of the other big TARP recipients through settlements of certain investment contracts.

According to media reports, the companies collecting from AIG included Goldman Sachs Group Inc., the firm formerly headed by Paulson; Merrill Lynch and Morgan Stanley. The latter investment firm got $10 billion in new capital from the Treasury Department.

Paulson announced the change in the Treasury Department's strategy for the TARP fund at the same time that some politicians, including President-elect Barack Obama, have raised the possibility of using $25 billion of the money to aid the U.S. auto industry.

Insurance companies and credit-card issuers also are looking for ways to tap into the rescue fund, as are some of the nation's biggest cities. The mayors of New York, Los Angeles, San Francisco, Chicago, Philadelphia and Phoenix jointly wrote Paulson, suggesting that $50 billion be used to finance building and infrastructure projects.

The current Congress has authorized $350 billion of the $700 billion in spending envisioned for the TARP program. The remainder of the money is not likely to be allocated until the new Congress is seated in late January.

Another bank has announced plans for a capital injection from the Treasury Department, and several more-diversified financial companies appear to be positioning themselves for federal aid as well.

First Midwest Bancorp Inc., which has headquarters in Itasca, Ill., said it was approved to sell $193 million in preferred stock to the Treasury Department.

The Treasury Department intends to provide $250 billion in capital to financial institutions as part of the $700 billion Troubled Asset Relief Program approved by Congress last month. So far, it has approved deals for roughly $170 billion of that amount.

The deadline for applications is Friday. As the date approaches, there are signs that companies from outside the traditional banking sector might also seek access to the funds.

American Express Co. won permission from the Federal Reserve this week to convert to a bank holding company, which would allow it to tap into various financial assistance programs. The Federal Reserve waived the usual 30-day waiting period, saying "emergency conditions" warranted faster action.

The move also covers two related entities, American Express Travel Related Services and American Express Centurion Bank. American Express is known primarily for its credit-card operations. Because of the financial crisis, it has been having trouble raising money by packaging and selling securities backed by those obligations.

The conversion came just in time for American Express to seek money through TARP.  American Express did not say whether it would apply for the program, in which participants issue preferred stock and warrants to the government in return for public money.

E*Trade Financial Corp. announced last week that it had applied for $800 million in TARP money. Although E*Trade is known primarily as a discount securities brokerage, it also has an online banking operation that takes deposits and offers mortgages and home-equity loans.

E*Trade reported a loss of $320.8 million from continuing operations in the third quarter, compared with a loss of $58.8 million in the same period last year. The bigger loss was partly the result of charges related to its real estate loans and partly because of losses on its shareholdings in Fannie Mae and Freddie Mac, the housing finance giants which were taken over by the federal government.

E*Trade said it expected to losses on its home-equity loan portfolio to total $1.8 billion from 2008 through 2010, up 20 percent from its previous estimate.

American International Group Inc., an insurance and investment firm, will get $40 billion in TARP funds under the revised rescue plan announced Monday. Other insurers also have been maneuvering to gain access to the program, as have auto makers.

Although the price tag on the Treasury Department's Troubled Asset Relief Program is $700 billion, the full amount that the government has invested in its rescue effort for struggling financial institutions appears to be closer to $2.5 trillion.

Bloomberg L.P., the parent company of Bloomberg News, said last week that it filed a lawsuit seeking information on the collateral that a group of banks pledged for some $2 trillion in emergency loans from the Federal Reserve.

Bloomberg asked a federal court in New York to require the Federal Reserve to disclose the identity of the banks that borrowed money through certain financing mechanisms, and to disclose what assets they pledged against those loans.

Bloomberg filed the suit after the Federal Reserve said that it would deny Bloomberg's request for the information under the Freedom of Information Act.

The financial firms that were eligible for some of the loans through the Federal Reserve included many of the same firms that split $125 billion in the first round of the Treasury Department's relief program.

The Treasury Department has approved more than $170 billion in capital injections for banks that applied to sell preferred stock to the government. It has about $80 billion remaining for additional participants, who must submit their applications by Friday.

The Treasury Department announced Monday that it also is investing $40 billion in the preferred shares of American International Group Inc. The financing it part of a new plan to salvage an earlier rescue plan that was going awry.

The revised plan brings the total assistance that AIG has received from the Federal Reserve and the Treasury Department to $150 billion.

Bloomberg reported that the Federal Reserve made its $2 trillion in emergency loans under 11 different programs, eight of which were created in the past 15 months.

The Treasury Department also made a little-noticed change to tax policy that experts say could save banks that merge with other banks as much as $140 billion in taxes. One of the biggest beneficiaries of the change would be Wells Fargo & Co., which is absorbing Wachovia Corp. in a deal spurred by the Federal Deposit Insurance Corp.'s concerns  about Wachovia's solvency. According to an article Sunday in the Washington Post, Wells Fargo stands to save about $25 billion in taxes.

Adding together the $170 billion that the Treasury Department has currently agreed to provide banks in additional capital, the $150 billion that the Treasury Department and the Federal Reserve are providing to AIG and the $2 trillion that the Federal Reserve has provided banks in emergency loans brings the total assistance to $2.32 trillion.

If the estimated savings from the new tax breaks are included, the assistance would climb to $2.46 trillion. That total does not include other measures not focused directly on banks, such as Treasury Department's $200 billion in support for Fannie Mae and Freddie Mac, and the Federal Housing Administration's $300 billion HOPE for Homeowners program.

With the application deadline for the Treasury Department's stock purchase program looming at the end of the week, a growing number of banks are announcing whether they intend to apply for government money.

The final wave of approvals is likely to include a number of small banks that are seeking some of the roughly $80 billion that remains of the $250 billion originally allocated for capital injections.

Intermountain Community Bancorp said Friday it had been selected by the Treasury Department for the program. The bank, based in Sandpoint, Idaho, will sell as much as $27 million in preferred stock to the government.

The new money will increase the bank's lending capacity and strengthen its competitive position, said Curt Hecker, president and chief executive officer.

"The capital is offered at favorable terms,'' he said in a prepared statement. "As such, it will serve as relatively low-cost insurance against uncertain economic times we face, and gives us an advantage with respect to future opportunities.''

Pamrapo Bancorp Inc. of Bayonne, N.J., said last week that it would apply for as much as $11.4 million in government capital to help solidify its capital base.

Pamrapo and the Office of Thrift Supervision agreed to a cease-and-desist order in late September that called for the bank to hire a consultant to help it comply with laws and regulations related to money laundering, currency transactions and suspicious activities.

The bank said that the action was unrelated to the soundness of the bank or the security of customer accounts. The Office of Thrift Supervision's order did not provide details of the activities that raised concerns.

Several other small banks announced last week that they would not be participating in the Treasury Department program.

Farmers & Merchants Bancorp Inc., which is based in Archbold, Ohio, said its management and board had decided against raising additional capital by selling shares to the government.

The bank said it had ample liquidity and was actively looking to make as many "good loans'' as it could find.

Capitol Federal Financial, which operates 40 banks in Kansas, said it also had enough capital and liquidity to continue its main mission of making mortgage loans.

Clifton Savings Bancorp Inc., which has headquarters in New Jersey, said it weighed the merits of participating in the Treasury Department program but decided against it. The bank noted that it was well capitalized, had not suffered losses on non-performing loans or investments in loan-related securities and had never offered subprime loans.

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The Treasury Department posted a solicitation yesterday for companies who will help manage hundreds of billions of dollars worth of stock, warrants and debt it will receive from banks and other participants in its financial industry rescue program.

The 16-page solicitation is a good illustration of the level of detail that the government requires from the contractors but does not pass along to the taxpayers who are funding the $700 billion program.

For example, companies bidding on the job must describe the composition and expertise of the employee team that will be overseeing the work, and must provide biographies of the senior members on the project.

None of the contracts the Treasury Department has issued to date for work under the Troubled Asset Relief Plan included details on the managers or other key personnel. In one case, involving an accounting-services contract, the agency blacked out the names of the individuals assigned to the project when it posted the agreement on its web site.

The Treasury Department also requires bidders to describe their proposed fees, and the reasons and logic behind them. None of the contracts that the agency has made public included an explanation of how the compensation was determined. In several instances, the sections covering fees were either blacked out or redacted.

The Treasury Department also is requiring the banks, brokerage firms and other companies bidding for the work to provide information on any current or potential conflicts of interest.

Bidders must disclose whether they or a corporate parent or subsidiary have sought assistance through the Troubled Relief Asset Plan. They also must disclose whether they hold any assets for other banks or institutions that are participating in TARP, or whether they have any other connections to companies involved in the program.

In announcing its earlier contracts, the Treasury Department did not mention any of those potential conflicts or say how they might be mitigated. The agency left it to journalists and other outsiders to point out the possible overlaps.

The contractors bidding on the asset-management work will value the securities purchased by the government, analyze the continuing financial condition and risk profiles of the institutions that issued them, and advise Treasury on the best time to cash out the government's investments.

Under the Treasury Department's plan to inject capital into banks, the government is buying preferred stock that pays a 5 percent dividend for the first five years and 9 percent thereafter. The Treasury Department also will get warrants to buy common stock in the participating banks, which could be exercised at a profit to taxpayers if the shares rise.

The Treasury Department said it would choose its asset managers based on a number of factors, including the company's proposed fees and costs, its capabilities and track record, its financial and management stability and the qualifications of the employees to be assigned to the project. The deadline for applications is Nov. 13.

The Treasury Department has chosen seven more banks to receive as much as $1.45 billion in government investment.

Webster Financial Corp. of Waterbury, Conn., announced today that it had been selected to sell $400 million in preferred stock to the Treasury Department as part of the $700 billion, taxpayer-funded Troubled Asset Relief Program.

Although the initial aim of the program was to buy distressed assets from banks to free up more money for lending, Treasury Secretary Henry M. Paulson Jr. has decided that direct capital injections through government investment are a better mechanism.

Webster Financial's chairman, James C. Smith, said participating in the program was the right thing to do.

"While Webster is already well capitalized, we support the Treasury's objective to ensure that sufficient credit is available for the borrowing needs of consumers and businesses,'' he said in a prepared statement. "Webster was founded during the Great Depression to help people build and buy their homes. True to our heritage, we are committed to helping the nation and our region solidify a foundation for future growth, including assisting distressed borrowers who are strugging during the current downturn.''

The Treasury Department is buying preferred stock from the banks participating in the program. The stock pays dividends of 5 percent annually for the first five years and 9 percent thereafter. The government also will get warrants to buy common stock in the banks, which could provide a return to taxpayers if the shares rise.

Associated Banc-Corp., based in Green Bay, Wis., is getting $530 million through the government stock purchases, while Trustmark Corp. of Jackson, Miss., was cleared for $215 million.

Two California banks also were chosen in the latest round of approvals. Pacific Capital Bancorp of Santa Barbara, Calif., is getting $188 million. Heritage Commerce Corp., which is based in San Jose., Calif., and serves Silicon Valley, will get $40 million.

Now that the Treasury Department has posted copies of six different bailout-related contracts with key sections either blacked out or deleted, we have decided to seek the missing information through the Freedom of Information Act.

Under federal law, the Treasury Department will have 20 business days to respond to our requests once they arrive in Washington, D.C.

The Treasury Department's open records policy mentions exemptions for some types of commercial or financial information. But it does not appear to us that descriptions of payment formulas or certain other details that were deleted from the bailout contracts the agency awarded to outside legal, accounting and financial advisers would qualify.

As BailoutSleuth previously reported, the contract the Treasury Department gave Bank of New York Mellon Corp. last month did not show how much the company would be paid to serve as the master custodian of the $700 billion bailout fund. The agreement said that the bank would receive a monthly fee, but the fee and all information about the calculation of the fee was blacked out of the copy that the agency posted on its web site.

The Treasury Department also blacked out or redacted nearly all information about the winning bids submitted by the accounting firms of Pricewaterhouse Coopers LLP and Ernst & Young. Pricewaterhouse Coopers was chosen to provide internal controls for the bailout fund. Ernst & Young will handle general accounting and consulting.

The Treasury Department said the first phase of those contracts were worth $191,469.27 and $492,006.95, respectively, but did not disclose how many hours of work those figures represented or anything else about how they were derived.

Earlier this week, the Treasury Department announced contracts with two law firms, Hughes Hubbard & Reed LLP of New York and Squire Sanders & Dempsey LLP of Cleveland. It said the firms would work on deals in which the government is injecting capital into banks through the purchase of preferred stock.

The Treasury Department said the initial contracts run for six months and are worth $5.5 million per firm. But copies of the purchase orders posted on its site omitted any details that would allow outsiders to determine whether the government got a good deal.

The Treasury Department also blacked out the hourly rates it was paying employees of Simpson Thacher & Bartlett LLP, which will provide legal advice under a contract the government said was worth $300,000.

Neel Kashkari, the Treasury Department official directing the bailout program, vowed after his appointment last month that it would be an "open and transparent program with appropriate oversight.''

The legislation that authorized the $700 billion program includes a provision that allows Treasury Secretary Henry M. Paulson Jr. to waive federal contracting rules "where compelling interests make compliance contrary to the public interest.'' But we don't see how that could be used to justify a lack of disclosure about the contracts themselves.

The Treasury Department may have to reveal more details about its contracts next month.

Another section of the legislation requires Paulson to report monthly to Congress on the agency's bailout-related activities, and to submit detailed financial statements. That reporting must begin within 60 days of his first use of authority under the legislation.

The Treasury Department has hired two law firms to work on a key part of its financial-industry rescue program -- the purchase of preferred stock in U.S. banks. The contracts have an initial term of six months and are worth $5.5 million per firm.

Hughes Hubbard & Reed LLP of New York and Squire Sanders & Dempsey LLP of Cleveland were chosen for the work.

Once again, the Treasury Department offered few specific details about its deals with the law firms. It redacted the price quotes in both the Hughes Hubbard contract and the Squire Sanders contract, and gave no information on the number of employees covered by the deals or the total number of hours they would work.

Although the Treasury Department is allowed to keep some propriety information confidential under federal privacy rules, the lack of specifics in the new contracts would seem to fall short of the transparency promised by those running the bailout program.

The most specific piece of information in the documents is the note that the firms will be responsible for handling between 4,000 and 8,000 transactions under the government's $700 billion Troubled Asset Relief Program, or TARP.

It's possible that taxpayers are getting a bargain from the firms. Another law firm, Simpson Thacher & Bartlett LLP, signed a contract with the Treasury Department last month to provide advice on its purchase of preferred stock in U.S. banks.

That six-month contract was worth $300,000. And although the hourly rates the firm is charging the government was blacked out in the copy of agreement made public, the number of hours listed in the document suggests that taxpayers got a better deal than the firm might have charged its private sector clients.

The contracts with Hughes Hubbard and Squire Sanders were signed Oct. 29 and run until April 29 of next year. A Treasury Department said it approached five law firms about doing the work, and got bids from four of them.

A check by BailoutSleuth shows that neither Hughes Hubbard nor Squire Sanders has extensive ties to the banks and other financial-services companies that are likely to be the main beneficiaries of the Treasury Departments's recsue program.

A Hughes Hubbard partner, James W. Giddens, recently became the court-appointed  trustee in the bankrutpcy liquidation of Lehman Brothers Inc. He was appointed at the requests of the Securities Investor Protection Corp. Hughes Hubbaard also was hired as counsel to the trustee.

Squire Sanders has dones legal work for Keycorp, a Cleveland-based bank that is slated to receive $2.5 billion in capital from the Treasury Department.

Squire Sanders also has been active on the European side of the financial crisis. It is advising an Icelandic bank, Landsbanki, whose United Kingdom arm has been put into receivership by British regulators.

Under their Treasury Department contracts, Hughes Hubbard and Squire Sanders will  review investment agreements for potential problems, work with the government and the banks to resolve any issues and then conduct the closing of the transactions.

The Treasury Department plans to use as much as $250 million of the $700 billion in bailout funding to inject capital into banks through the purchase of preferred stock and warrants to buy common shares.

The government has already granted preliminary approval for more than $160 billion in investment in roughly 40 banks.

Four more banks have announced plans to sell preferred stock to the Treasury Department, in deals that will bring them nearly $550 million in taxpayer money.

TCF Financial Corp., of Wayzata, Minn., said it had been approved for an investment of $361 million.

The other three banks approved for government funds are all based in the Pacific Northwest.  Banner Corp., which has headquarters in Walla Walla, Wash., said it plans to issue $124 million in preferred shares to the Treasury Department.

Cascade Financial Corp., of Everett, Wash., is getting about $39 million, and Heritage Financial Corp., of Olympia, Wash., was approved for $24 million.

All four of the banks characterized their selection for the Treasury program as a recognition of their financial strength. Each noted that it was rated as "well capitalized'' under regulatory guidelines even without the new money.

The Treasury Department plans to inject $250 billion in capital into U.S. banks through the purchase of preferred stock. The money is coming from the $700 billion financial-industry bailout program approved by Congress last month.  

The Treasury Department initially planned to use the money to buy troubled assets from the banks, freeing up capital they could then use to make additional loans. But Treasury Secretary Henry M. Paulson Jr., who had broad authority over how the money is spent, decided that providing capital directly to the banks was a more effective approach.

The Treasury Department has so far approved more than $160 billion in investment in roughly 40 banks. Applications for the remaining $90 billion are due by Nov. 14.

Although some of the 30-plus banks that are getting money from the Treasury Department through its $700 billion financial-industry rescue program have cut dividends in response to tough financial conditions, only one has suspended them.

In fact, BailoutSleuth's analysis of the quarterly payouts by those banks shows that at least 10 will initially provide greater annual dividend yields to shareholders than they will to taxpayers supplying the new capital.

At current stock prices and dividend rates, the annual yield on the 10 banks' common shares will exceed the 5 percent that they are paying on the preferred shares they are selling to the federal government.

Politicians from both major political parties have complained about the possibility that banks getting taxpayer money will use the cash for shareholder dividends and employee bonuses, instead of making loans needed to ease tight credit and stimulate the economy.

Some bankers have countered that the money used for dividends and compensation comes from different pools of capital. And the White House has defended the dividend payments, suggesting that certain investors, including retirees, who bought bank stocks with the expectation of steady, attractive dividends would suffer further harm.

"I think some critics believe that only rich people get dividend payments,'' said Dana Perino, White House spokesperson, in a press briefing on Friday. "And that is not the case. Mutual funds, retirees, teachers, pension funds are all beneficiaries of dividend payments. They get dividend payments from banks."

Some of the bank that are getting the biggest chunks of government money also pay the biggest relative dividends.

Merrill Lynch Inc., which is in the process of being taken over by Bank of America Corp., pays a quarterly dividend of 35 cents a share on its common stock. That translates to $1.40 annually.

At its current stock price, its dividend yield would be in the neighborhood of 7.5 percent a year, according to calculations by Morningstar Inc.

Merrill Lynch is getting $10 billion through the sale of preferred stock to the Treasury Department. Under the terms of the investment deals with the government, banks pay dividends of 5 percent on those shares the first five years and 9 percent after that.

The deals also give the Treasury Department warrants to buy a certain amount of common stock in the banks at a later date, but there is no guarantee that those rights will have any value.

Bank of America got $15 billion through the Treasury Department program. It cut its quarterly dividend in half last month, and now pays the equivalent of $1.28 a share per year. Even with that adjustment, the annual dividend yield at its current share price is around 5.3 percent.

Morgan Stanley also is getting $10 million from the government. It pays $1.08 a share in dividends on its common stock. At its current stock price, the annual dividend yield would be around 6.2 percent.

US Bancorp said Monday it has been selected for the program and would sell $6.6 billion in preferred stock to the Treasury Department. The Minneapolis-based bank pays the equivalent of $1.70 a year in dividends on its common stock.

At its current share price, that translates to an annual dividend yield of 5.7 percent, according to Morningstar's data.

Marshall & Ilsley Corp., which has headquarters in Milwaukee, has signed up for $1.7 billion in government capital. It pays dividends on its common shares at a rate of $1.28 a year, which translates at the moment to an annual dividend yield of 7.1 percent.

Keycorp, of Cleveland, is getting $2.5 billion from the Treasury Department. It cut its dividend by 50 percent in June, to an annual rate of 75 cents a share.  Even so, the annual dividend yield is around 6 percent.

Four other banks - BB&T Corp., Fifth Third Bancorp, Huntington Bancshares Inc. and First Financial Bancorp - all have current annual dividend yields ranging from 5.1 percent to 5.6 percent, according to Morningstar.

Together, those banks are getting nearly $8 billion. All of their dividend yields -- like those of the other banks mentioned above -- could decline if their share prices rise or their dividend payouts fall.

Midwest Banc Holdings Inc. was another new addition to the bailout list on Monday. The bank, based in Melrose Park, Ill., announced that it had been approved to sell $85.5 million in preferred stock to the Treasury Department.

Midwest Banc Holdings suspended its third quarter dividend last month. It reported a loss of $159.7 million for the third quarter, reflecting loan losses and the write-off of its $67 million in preferred stock it held in Fannie Mae and Freddie Mac, two government-sponsored entities that buy mortgages.

With politicians and the public raising questions about how banks use the money they receive through the Treasury Department's $700 billion rescue program, BailoutSleuth decided to take a closer look at the dividends they pay to shareholders.

We found that three banks that stand to receive $8.65 billion in government capital have actually increased their dividends this year, even as financial pressures mount.

Capital One Financial Corp., which plans to sell $3.55 billion in preferred stock to the Treasury Department, sharply boosted its quarterly dividend in January. The new payout is 37.5 cents a share, up from 2.7 cents.

Capital One has roughly 388.9 million common shares outstanding, which means the annual dividend payments on that stock would be $583.3 million at the current rate.

Although Capital One was solidly profitable in the third quarter of this year, the McLean, Va.-based company noted that earnings were down from the previous quarter, in part because of increased loss provisions on loans.

BB&T Corp., which has headquarters in Winston-Salem, N.C., announced in June that it was raising the quarterly dividend on its common stock by 2.2 percent, to 47 cents. BB&T is slated to get $3.1 billion from the sale of preferred shares to the Treasury Department.

BB&T said this month it had third-quarter earnings of $358 million, down from $444 million a year earlier. It noted that it had boosted its loan-loss provisions to $364 million, up nearly 250 percent.

BB&T has 552.3 million shares outstanding. At the current dividend rate, the annual payouts on that stock would total $1.03 billion.

State Street Corp., of Boston, said in June that it was boosting its quarterly dividend by 4.3 percent, to 24 cents. State Street was one of the first nine banks picked to receive capital injections from the Treasury Department. It is getting $2 billion.

Like Capital One and BB&T, the bank is still solidly profitable. It reported earnings of $477 million in the latest quarter, up 33 percent from a year ago. However, a report of rising unrealized losses in its commercial paper operations sent its stock skidding.

State Street has 431.6 million shares outstanding. At the current rate, the dividend payouts on that stock would total $405.7 million.

Banks participating in similar rescue programs in Great Britain and Germany are prohibited from paying dividends until they repay their loans from the government.

U.S. Rep. Barney Frank warned Friday that Congress could cut funding for the American bailout program if it finds that banks are using taxpayer funds for shareholder dividends  management bonuses and severance packages instead of loans. Frank, a Democrat from Massachusetts, is chairman of the House Financial Services Committee.

BailoutSleuth will post a more in-depth story tomorrow at the dividend policies of banks in the Treasury's bailout program. Please check back then for a closer look.

Two more banks have announced plans to sell stakes in themselves to the federal government under the Treasury Department's $700 billion program to inject capital into the financial markets.

The banks, in Ohio and Arkansas, would sell as much as $120 million in preferred shares to the Treasury Department. Four other banks said they had applied, or planned to apply, for more than $1 billion in federal assistance.

First Financial Bancorp., a Cincinnati-based bank holding company with $3.5 billion in assets, said it had been approved to sell as much as $80 million in preferred stock to the Treasury Department.

Claude Davis, the company's president, said the capital would strengthen the bank, increase its lending capacity and help it take advantage of strategic growth opportunities.

Simmons First National Corp., of Pine Bluff, Ark., said it had been approved to sell $40 million in preferred stock to the Treasury Department.

J. Thomas May, the company's chairman and chief executive, cited acquisition prospects  rather than lending opportunities as the main reason the bank sought the funds.

"While our company is very well capitalized, the cost of capital under the program is favorable given the current market, and it provides us additional capital for potential acquisition opportunities within our targeted markets," he said in a prepared statement.

Synovus Financial Corp., which is based in Columbus, Ga., and is the second-largest bank in that state, said it would ask shareholders to approve a change in the company's bylaws to allow the sale of preferred stock. It said that, if the change is authorized, it will seek as much as $900 million from the Treasury Department.

Signature Bank of New York said it applied for $120 million in capital.

First Community Bancshares Inc., with headquarters in Bluefield, Va., said it intends to apply for as much as $42.5 million in capital.

The Treasury Department's resue program might even extend to Michigan's remote Upper Peninsula. Mackinac Financial Corp. , based in Manistique, Mich., said in a press release announcing a steep drop in earnings that it would seek an undetermined amount of capital by selling shares to the government.