December 2008 Archives

The Treasury Department has released written responses to questions posed earlier this month by the Congressional panel charged with oversight on the $700 billion Troubled Asset Relief Program.

The Treasury Department defended its shifting approach to stabilizing the financial markets, and insisted that the measures it has taken so far have helped avert a greater crisis.

"The most important evidence that our strategy is working is that Treasury's actions, in

combination with other actions, stemmed a series of financial institution failures,'' the agency wrote to the Congressional Oversight Panel for Economic Stabilization. "The financial system is fundamentally more stable than it was when Congress passed the legislation.''

To read the Treasury Department's comments in full, click on this link to the document.

The Treasury Department issued taxpayer capital last week to more than 20 banks that had not previously announced their participation in the government's $700 billion Troubled Asset Relief Program.

The names of the banks and the amounts they received were listed in a summary of recently completed transactions released by the Treasury Department late Monday.

BailoutSleuth also noted that we overlooked a release Dec. 23 by First BanCorp, of San Juan, Puerto Rico, that it had been approved for $400 million in taxpayer capital. Two other similarly named banks were previously selected for the program.

First BanCorp reported $24.5 million in the profits for the third quarter, up 74 percent from a year earlier. The company said earnings rose despite higher loan loss provisions, primarily tied to mortgages in the mainland United States.

Other banks that recently received taxpayer capital through the Treasury Department were Parkvale Financial Corp., of Monroeville, Pa.; HMN Financial Inc., of Rochester, Minn., and Peoples Bancorp of North Carolina Inc., in Newton, N.C.

Parkvale Financial sold $31.8 million in preferred stock the government. HMN Financial sold $26 million of its preferred stock, and Peoples Bancorp sold $25 million worth. Under the terms of the program, the stock pays annual dividends of 5 percent for the first five years and 9 percent thereafter. The Treasury Department also gets warrants to buy additional equity in participating institutions.

Many of the banks that got capital injections from the Treasury Department on Dec. 23 were privately held companies. That list included Nicolet Bankshares Inc., of Green Bay, Wis., which got $14.96 million, and Pacific Coast Bankers' Bancshares, of San Francisco, which got $11.6 million.

Pacific Coast Bankers' Bancshares is owned by more than 150 community banks, and provides correspondent banking services and other assistance to more than 500 community banks across the country. 

The Treasury Department said Monday night it would invest $5 billion in GMAC LLC as part of its effort to aid the struggling U.S. auto industry, and would loan as much as $1 billion to General Motors Corp. in connection with the deal.

General Motors owns 49 percent of GMAC, which provides financing for auto dealerships and auto buyers, and has units that make mortgage and commercial loans. GMAC has been hurt by the weak economy and by the collapse of the market for asset-backed securities, such as those created by bundling auto loans.

The Federal Reserve last week granted GMAC its request to convert to a bank holding company, a prerequisite for tapping into the $700 billion Troubled Asset Relief Program passed by Congress in October. The Treasury Department said it would loan money to General Motors so that it could participate in the $1.25 billion rights offering that is part of GMAC's transition to a bank holding company.

The Treasury Department will have the right to exchange the debt for the equity interests that General Motors receives in the restructuring.

The loan is separate from the $17.4 billion in financing that President George W. Bush and Treasury Secretary Henry M. Paulson Jr. announced on Dec. 19.

According to the term sheet for the GMAC deal, the Treasury Department will get preferred stock paying an annual dividend of 8 percent. The rescue plan is contingent on other concessions by General Motors and Cerberus Capital Management LP, which bought 51 percent of GMAC in 2006. Cerberus also is majority owner of Chrysler LLC.

The Treasury Department announced a new wave of bank investments, including stakes in the first privately held institutions to get taxpayer money through the $250 billion Capital Purchase Program.

BailoutSleuth has turned up 23 new participants, approved for a total of $626 million in taxpayer capital. Of those, 13 are privately held companies and one is classified as a community development financial instutition.

S&T Bancorp., of Indiana, Pa., said it was approved to sell $109 million in preferred stock to the government.  The bank, with 55 branches within Pennsylvania, has $4.5 billion in assets. It posted a profit of $44.4 million for the first nine months of 2008, up 3.7 percent.

PlainsCapital Corp. of Dallas was approved for $87.6 million in taxpayer investment and has already received the money. The privately held company is the parent of PlainsCapital Bank, which specializes in serving middle-market companies and high-net worth individuals. It lists its assets at $3.4 billion.

It announced in November that it had agreed to buy First Southwest Holdings Inc., a financial advisory and investment banking firm.

Other privately held companies getting investments from the Treasury Department include Exchange Bank, of Santa Rosa, Calif.; Bridgeview Bancorp Inc., of Bridgeview, Ill., and Fidelity Financial Corp., of Wichita, Kan.

Exchange Bank got $43 million in taxpayer capital, Bridgeview got $38 million and Fidelity Financial got $36.3 million.

S.Y. Bancorp Inc., of Louisville, Ky., said it was approved to sell $43 million in preferred stock to the Treasury Department. The parent company of Stock Yards Bank & Trust said it also raised $28.5 million through a private stock sale.

Smithtown Bancorp of Smithtown, N.Y., said it was approved for $37.8 million in government money. Marquette National Corp., of Chicago, was approved for $35.5 million, and Royal Bancshares of Pennsylvania Inc., based in Narberth, Penn., was approved for $30 million.

The Capital Purchase Program is part of the broader $700 billion Troubled Asset Relief Program. The preferred stock that the publicly traded banks are selling to the government pay an annual dividend of 5 percent for the first five years and 9 percent thereafter. The Treasury Department also gets warrant to buy common stock, which could provide a return to taxpayers if the shares increase in value.

The Treasury Department did not outline the terms of its investments in the privately held banks. A summary sheet reported only that the government received warrants to buy preferred stock, which it exercised immediately.

Thacher Proffitt & Wood LLP, which was hired by the Treasury Department less than three weeks ago to work on the government's $700 billion bailout program, has announced that it will dissolve after the first of the year.

The venerable New York law firm said in a press release that roughly 100 of its attorneys will move to another firm, Sonnenschein Nath & Rosenthal LLP of Chicago, effective Jan. 1.

Thacher Proffitt said 40 partners from its structured finance, real estate and corporate and financial institutions practice will join Sonnenschein. The three main partners on the Treasury Department contract are among them.

Thacher Proffitt was hired by the Treasury Department on Dec. 10 to provide legal advice on the purchase of asset-backed securities. The agency said the deal would run for six months and that the cost was not expected to exceed $500,000.

It is unclear whether Sonnenschein will seek to assume the Treasury Department contract. Although the firm took on many of Thacher Proffitt's lawyers, it did not acquire the firm, which had been one of the leaders in the field of asset- and mortgage-backed securities. Thacher Proffitt's fortunes skidded in the past few years along with the market for those securities.

The contract with Thacher Proffitt that the Treasury Department posted on its web site concealed the hourly rate the government was paying for legal services and omitted other information about the financial terms.

The portion of the contract that the Treasury Department made public did specify that the government would pay for a maximum of 1,300 hours of legal work. BailoutSleuth has filed a request under the federal Freedom of Information Act for an unredacted copy of the agreement.

At the time that Thacher Proffitt won the Treasury Department contract, it was in merger talks with another big firm, King & Spalding LLP, of Atlanta. But the negotiations on that proposed combination ended when it became known that some of Thacher Proffitt's lawyers might be moving to Sonnenschein.

The Federal Reserve has agreed to reclassify GMAC Financial Services as a bank holding company, aiding the auto lender's effort to gain access to billions in government capital through the Troubled Asset Relief Program.

The decision will allow GMAC to seek investment from the Treasury Department through its $700 billion bailout fund, and to borrow money from the Federal Reserve through its discount window, which provides short term loans to help financial institutions meet their liquidity needs.

GMAC finances inventory for auto dealers and provides loans for buyers. It also makes mortgage loans and other loans. It historically has packaged the loans into securities and resold them to investors, replenishing its capital and then repeating the cycle.

But the collapse of the market for those types of asset-backed securities has made it difficult for GMAC to raise the money it needs to keep its business going and meet its obligations to its own lenders.

GMAC's approval as a bank holding company comes with some conditions. Its owners, General Motors Corp. and Cerberus Capital Management LP, must significantly reduce their stakes in the business within three years.

General Motors and Cerberus, the majority owner of Chrysler LLC, already stand to receive $17.4 billion in loans from the Treasury Department under the auto-industry bailout plan authorized Dec. 19 by President George W. Bush.

Earlier this week, the Federal Reserve approved American Express Co. and CIT Group Inc. as bank holding companies. Shortly thereafter, they announced that they would receive a total of $5.72 billion in investment from the Treasury Department.

The Treasury Department authorized $5.72 billion in capital injections Tuesday for two big financial services companies -- American Express Co. and CIT Group Inc.

American Express said it won approval to sell $3.39 billion in preferred stock to the government. Although it is known primarily as a credit-card issuer, American Express recently converted to a bank holding company so it could qualify for aid under the $700 billion Troubled Asset Relief Program.

CIT Group said it was approved for $2.33 billion in taxpayer investment. The commercial finance company had announced Monday that the Federal Reserve approved its application to become a bank holding company.

The preferred stock that American Express and CIT Group are selling to the Treasury Department will pay annual dividends of 5 percent for the first five years and 9 percent thereafter.

Five more banks said they were chosen to receive capital injections from the Treasury Department. And a major business lender said it was approved as a bank holding company, a key step in its bid for billions in government aid.

CIT Group Inc., which is reported to have applied for $2.5 billion in capital through the Troubled Asset Relief Program, said the Federal Reserve had granted its request to be classified as a bank holding company. The decision not only makes CIT Group eligible for TARP money but allows the New York-based company to participate in other bailout programs, such as loans from the Federal Reserve.

Pulaski Financial Corp., based in St. Louis, was approved to sell $32.5 million in preferred stock to the Treasury Department. Pulaski Financial had profits of $2.9 million for its 2008 fiscal year, off nearly 68 percent. It posted a $4.1 million loss in the final quarter, largely because of higher loan loss provisions and a complete writeoff of its investment in Fannie Mae, the government-sponsored mortgage company.

Community Financial Corp., of Staunton, Va., said it was chosen to sell $12.6 million in stock to the government and had already completed the transaction. North Central Bancshares Inc., of Fort Dodge, Iowa, said it would get $10.2 million. It is the parent company of First Federal Savings Bank.

Idaho Bancorp, of Boise, Idaho, announced Monday that it was approved to sell $6.9 million in stock to the government. California Oaks State Bank, based in Thousand Oaks, Calif., said it would get $3.3 million.

The Treasury Department set aside $250 billion of the first wave of TARP money to invest in banks. The preferred stock it buys through the so-called Capital Purchase Program pays an annual dividend of 5 percent for the first five years and 9 percent thereafter.

A sixth bank, Chemical Financial Corp. of Midland, Mich., said it was approved for $84 million but declined the money.

"While Chemical Financial Corporation strongly supports the overall purpose and design of the Capital Purchase Program, our board and management felt that the CPP features did not align with our strategic goals," said David B. Ramaker, the company's chairman and chief executive.

Chemical Financial's management and board of directors decided that the restrictions imposed on companies getting government investment, and the potential dilution to existing shareholders, outweighed any potential benefits, Ramaker said in a statement.

Five more banks announced that they were approved to sell preferred stock to the Treasury Department under the $700 billion Troubled Asset Relief Program. The banks would get a little more than $112 million in taxpayer money.

Hawthorne Bancshares Inc., of Lee's Summit, Mo., said it was approved to sell $30.3 million in stock to the government. Century BanCorp Inc., based in Medford, Mass., was approved for $30 million. Colony Bankcorp Inc., of Fitzgerald, Ga., will get $28 million.

Carolina Bank Holdings Inc., of Greensboro, N.C. was approved to sell $16 million in stock to the Treasury Department. Annapolis Bancorp Inc., of Annapolis, Md., was approved for $8 million.

Another company, Enterprise Bank of Lowell, Mass., said it was chosen to receive $28.5 million in taxpayer money but decided against taking the money.

M&T Bank Corp., which was approved for $600 million in taxpayer capital through the Treasury Department's Troubled Asset Relief Program, announced Friday that it had agreed to buy Provident Bankshares Corp., another recipient of bailout cash.

M&T, which has headquarters in Buffalo, N.Y., said it would buy Provident with $401 million in stock. The bank has operations in New York, New Jersey, Pennsylvania, Virginia and several other states.

Provident, of Baltimore, has been hit hard by the real estate slump and other economic pressures. It posted a loss of $12.8 million for the first nine months of 2008, compared with a profit of $47.6 million in the same period last year.

Provident took $88 million in charges in first three quarters of this year to reflect the reduced value of its mortgage-backed securities and other investments. The bank announced in November that it would sell $151 million in preferred stock to the Treasury Department through the TARP program.

At the time, Chairman Gary N. Geisel made no mention of Provident seeking a merger partner.

"This investment will further strengthen our capital position, increase our ability to finance attractive lending opportunities and enable Provident to provide additional support for economic growth in our local markets,'' he said in a statement then.

Provident said in a Securities and Exchange Commission filing outlining the merger that the value of $10.50 a share placed on the deal represented a 37.5 percent premium for the bank's shareholders over the 20-day average share price.

M&T had $65.2 billion in assets as of Sept. 30, compared with $6.4 billion for Provident. Together, the two banks would have more than $41 billion in deposits. The banks said they expected to complete their merger in the second quarter of 2009.

The White House and Treasury Department have come to the rescue of the U.S. auto industry with a $17.4 billion loan package that will be financed through the $700 billion Troubled Asset Relief Program.

General Motors Corp. and Chrysler LLC  expected to draw down the first $13.4 billion of that total over the next two months. GM would get $9.4 billion and Chryster would get $4 billion. The remaining $4 billion would become available in February.

The rescue plan will claim the last of the initial $350 billion that Congress authorized for TARP. Treasury Secretary Henry M. Paulson Jr. said he will ask lawmakers to release the second half of the money to fund additional economic-stability efforts.

The term sheet that the Treasury Department released Friday gives the automakers two months to develop preliminary financial and operating plans that would lead to long-term viability, international competitiveness and energy efficiency.

If they cannot demonstrate long term viability by March 31, 2009, the government can call the loans.

Automakers who get aid from the government must accept restrictions on executive salaries and bonuses, incentive compensation and severance, in keeping with the guidelines established for financial companies getting aid through TARP.

The rescue package also calls for the borrowers to cut total compensation for their American workers to levels that equal the average pay and benefits at Toyota Motor Corp., Nissan Motor Co. and American Honda Motor Co. in the United States. The automakers would have to meet that target by Dec. 31, 2009.

In addition the automakers must stop making payments to any employees who have been fired, laid off, furloughed or idled through some other means, such as the so-called "jobs bank'' created decades ago to ease the pain of earlier restructuring efforts.

The aid is contingent on the unions representing workers at the automakers signing the agreements as well.

The rescue plan also call for Chrysler and General Motors to make their best efforts to reduce their public indebtedness - excluding pension and employee benefit obligations - by two-thirds. They could either issue new debt or convert old debt to equity.

In addition, automakers who accept the loans must sell all of their corporate aircraft or interests in corporate aircraft. Executives of Chrysler, General Motors and Ford Motor Co. angered members of Congress in November when they flew to Washington on private jets for hearings at which they appealed for taxpayer money.

Fox Business Network said Thursday it filed suit against the Treasury Department, seeking to force the agency to turn over information on its bailout deals with American International Group Inc., Citigroup Inc. and Bank of New York Mellon.

The network said that the Treasury Department had either rejected its requests for details on the agreements with those companies, or failed to respond to its petitions for expedited disclosure under the federal Freedom of Information Act.

"The Treasury has repeatedly ignored our requests for information on how the government is allocating money to these troubled institutions,'' said Kevin Magee, executive vice president of Fox News. "In a critical time like this amidst mounting corruptions and an economic crisis, we as a news organization feel it's more important than ever to hold the government accountable.''

Fox said it wanted Treasury to disclose, among other things, any troubled assets the government purchased as part of the bailout deals, any collateral the companies pledged, and any restrictions placed on the companies for their participation in the program.

The Treasury Department bought $40 billion in newly issued preferred shares of AIG in November as part of an expanded and modified $152.5 billion rescue plan. The deal also included $60 billion in loans and $52.5 billion to purchase troubled assets.

The Treasury Department bought $45 billion of Citigroup's preferred stock, and also agreed to provide guarantees on $306 billion in troubled assets held by the bank. The department invested $3 billion in Bank of New York Mellon, and hired the firm as the master custodian for the $700 billion to be spent on the Troubled Asset Relief Program.

BailoutSleuth also has filed Freedom of Information Act requests with the Treasury Departments for details of it sagreements with Bank of New York Mellon and five other companies hired as contractors on the TARP program. When the Treasury Department posted the master custodian  contract on its web site, it blacked out the amount of money that Bank of New York Mellon would be paid under the agremeent, as well as the section that spelled out how the company's compensation would be calculated.

Bloomberg News has sued the Federal Reserve, seeking access to information about moe than $2 billion in emergency loans to a number of unidentified financial instutitions. Bloomberg sued after its request under the Freedom of Information Act were denied.

A copy of Fox's suit was not immediately available Thursday night.

Four more banks announced their participation in the Treasury Department 's stock purchase program Thursday, while a fifth said it was declining the taxpayer money that it was selected to receive.

Evans Bancorp Inc., of Hamburg, N.Y., said its board of directors concluded that the bank did not need the $11.9 million it was allocated, because it already had a strong balance sheet and had little exposure to subprime loans or other troubled assets.

"Other considerations with this decision include the potential impact on our shareholders as the result of dividend constraints placed by the government and uncertainty revolving around the terms of the agreements,'' President David J. Nasca said in a prepared statement. "Evans Bank is actively lending in our community, and we are more than able to meet customer demands and execute our strategic plan without these funds.''

Evans Bank is the first financial institution we have seen that applied for a portion of the $250 billion in government money, was approved and then rejected the entire investment. The other four banks announcing their selection for the program on Thursday would receive a little over $117 million.

MainSource Financial Group, based in Greensburg, Ind., said it was approved to sell $57 million in preferred stock to the Treasury Department. MainSource's earnings for the third quarter were off 3.6 percent from the same period of 2007. It said its expenses for loan losses were $5.3 million, compared to $1.2 million a year earlier.

MainSource has branches in Indiana, Ohio and Kentucky. It acquired 1st Independence Financial Group Inc., of Lousiville, Ky., in August.

Shore Bancshares Inc., based in Easton, Md., said it was approved for $25 million in taxpayer capital. Shore is the parent company of three banks - Talbot Bank, Centreville National Bank of Maryland and Felton Bank. The company's earnings for the third quarter and first nine months of the year were little changed from 2007.

Bar Harbor Bankshares, of Bar Harbor, Maine, was approved to sell $18.75 million in preferred stock to the government. The company said its earnings for the third quarter were up 21.5 percent, largely because of investment gains, and that its non-performing loans remained at relatively low levels by industry standards.

Timberland Bancorp, of Hoquiam, Wash., is eligible for $16.6 million in new capital through the Treasury Department. Timberland's earnings for its 2008 fiscal year fell 50.9 percent, reflecting a loss on an investment and increased loan-loss provisions.

The preferred stock that the banks are selling to the Treasury Department pay an annual dividend of 5 percent the first five years and 9 percent thereafter. The deals also give the government warrants to buy common stock, which could provide a return to taxpayers if the banks' share prices rise over time. 

The Treasury Department has hired the law firm of Thacher Proffitt & Wood LLP to advise it on purchases of asset-backed securities.

Once again, the contract that the Treasury Department posted on its web site conceals the hourly rate that the government is paying Thacher Proffitt's lawyers, and omits most other information about the financial terms of the deal.

The Treasury Department said the total amount of taxpayer money the law firm will receive over the six-month term of the agreement is not expected to exceed $500,000.

The text of the agreement posted with the press release says the minimum number of attorney hours covered by the contract is 100, and the maximum number is 1,300. The Treasury Department whited out the hourly rates it will pay for the services of Thacher Proffitt's partners and associates. The document also makes no mention of what the government might be paying for other services provided by the firm.

The Treasury Department has previously blacked out or redacted the hourly rates it agreed to pay three other law firms that are advising it on other aspects of the $700 billion Troubled Asset Relief Program. Those contracts are worth roughly $11.3 million.

Thacher Proffitt is to advise the Treasury Department on any investments it makes through the Federal Reserves's Term Asset Backed Securities Loan Facility. The Federal Reserve announced Nov. 25 that it would lend up to $200 billion to holders of certain asset backed securities tied to new consumer and small-business loans.

Thacher Proffitt is one of the leading law firms in the asset-backed and mortgage-backed securities market. Its fortunes have declined, however, as those markets have contracted. The firm has reduced its legal staff by nearly a third since the fall of 2007.

Thacher Proffitt's clients have included Citigroup Inc., Goldman Sachs Group Inc. and other financial companies that have received billions in new capital from the Treasury Department through its stock purchase program. The firm also represented Bear Stearns Cos. in its Federal Reserve-assisted sale to JPMorgan Chase & Co.

Fifteen more banks have announced their acceptance into the Treasury Department's stock purchase program, including a Colorado bank that specializes in lending to small and midsize businesses.

The latest approvals represent $643 million in taxpayer investment, and push the total number of banks getting money through the Troubled Asset Relief Program above 200.

CoBiz Financial Inc., based in Denver, said it was approved to sell $64.5 million in preferred stock to the government. CoBiz is the parent company of Colorado Business Bank and Arizona Business Bank.  Its earnings for the third quarter were unchanged from the same period last year, and its provisions for loan losses were slightly lower. CoBiz also has raised $20.4 million from private investors to strengthen its capital base.

Community Trust Bancorp Inc., of Pikeville, Ky., said it was cleared for $68 million in taxpayer investment. The bank posted a $577,000 loss in the third quarter, compared to a profit of $8.62 million a year earlier. It attributed the reversal to a writedown on its investment in Fannie Mae and Freddie Mac, the government-sponsored mortgage companies that were put into conservatorship in September.

First Bancorp, based in Troy, N.C., was approved to sell $65 million in stock to the government. First Bancorp's earnings were up 7.9 percent for the third quarter, in part because of its acquisition this year of Great Pee Dee Bancorp. However, the bank said its provision for loan losses doubled from the third quarter of 2007.

Enterprise Financial Services Corp., of St. Louis, will get $62 million in government capital. Union Bancshares Inc., of Bowling Green, Va., will get $59 million. Lakeland Bancorp Inc., of Oak Ridge, N.J. also was approved for $59 million in taxpayer money.

In early November, BailoutSleuth sent six Freedom of Information Act requests to the Treasury Department, seeking unredacted copies of the contracts it signed with six outside consultants on the $700 billion Troubled Asset Relief Program.

We wanted to know what was in the paragraphs that the Treasury Department had either blacked out or cut out. Most of the missing text related to amount of money the investment managers, law firms and accounting firms would be paid, the formulas used to determine their compensation or the employees who would be overseeing the work.

We told the Treasury Department that BailoutSleuth was an independent, online news organization that was tracking the government's rescue plan for the financial services industry. We asked that, because BailoutSleuth is journalistic enterprise, any fees for research and copying be waived. That's a standard request for reporters or news organizations filing federal records requests.

The Treasury Department responded within the 20 days allowed in the Freedom of Information Act. But the administrator handling the requests said he couldn't process them without more information.

"If you would like us to consider your fee waiver request, please provide information that would help the Department to determine whether the public would benefit from the disclosure of the records you requested,'' the letter said. "Please also provide information about your expertise in the subject area of your request, your ability and intention to disseminate the information to the public, and any specialized knowledge you have that would help you convey the information to the public."

The letter also asked us to specify an upper limit for the amount we'd be willing to pay for research and copying costs in the event our request for a waiver is denied. We did that in our reply, while noting that we expected any costs to be minimal because the redacted versions of the documents are posted on the Treasury Department's own web site and the original should not take long to locate. We are awaiting a response.

Meanwhile, Bloomberg News reported Friday that the Federal Reserve rejected its latest request for records about which financial institutions got more than $2 trillion in emergency loans from that quasi-government agency, and what assets those companies pledged as collateral.

Bloomberg said the Federal Reserve noted that the United States is facing an unprecedented financial crisis, and that "loss in confidence in and between financial institutions can occur with lightning speed and devastating effects.''

Bloomberg has been asking the Federal Reserve since late spring for details on the emergency loans and the collateral. After failing to get access to the information, it filed suit in U.S. District Court on Nov. 7.

The Federal Reserve's latest denial was in response to a broadened request for specifics on the loan programs. According to Bloomberg, the agency said in its response that it was allowed to withhold internal memos, trade secrets and certain commercial information.

"Notwithstanding calls for enhanced transparency, the Board must protect against the substantial, multiple harms that might result from disclosure,'' a Federal Reserve official said in a letter to the news organization.

Regulators shut down two more banks on Friday, including yet another financial institution in the Atlanta area.

The Georgia Department of Banking and Finance closed Haven Trust, of Duluth, Ga., and the Federal Deposit Insurance Corp. took over as receiver. It arranged for BB&T Corp., of Winston-Salem, N.C. to take over Haven Trust's $515 million in deposits.

BB&T is one of the 15 biggest recipients of taxpayer capital through the Treasury Department's $700 billion Troubled Asset Purchase Program. BB&T sold $3.3 billion of preferred stock to the government.

Of the 25 bank failures in the United States this year, five have been in Georgia.

First Georgia Community Bank, of Jackson, Ga., was taken over on Dec. 5, and Community Bank, in Loganville, Ga., was seized on Nov. 24.

The other casualties in that state were Alpha Bank & Trust of Alpharetta, Ga., which was shut down on Oct. 24, and Integrity Bank, also of Alpharetta, which was closed on Aug. 29. Integrity was the biggest of the failed Georgia institutions, with $974 million in deposits. It became part of Regions Bank.

The Texas Department Banking shut down Sanderson State Bank in Sanderson, Tex., on Friday. The FDIC arranged for Pecos County State Bank to take over its $27.9 million in deposits.

Sanderson State Bank was the second Texas institution to fail since the financial crisis began. Franklin Bank, which was based in Houston, was shut down in November. Its $3.7 billion in deposits were acquired by Prosperity Bancshares Inc., also of Houston.

Prosperity Bank said in November it would not apply for TARP funds.

Nine more banks said their applications to sell preferred stock to the Treasury Department were approved. They will receive a total of $133.4 million in taxpayer capital.

Cardinal Financial Corp., which has headquarters in Tysons Corner, Va., said it won approval for $41.2 million in government investment. Cardinal Financial posted a loss of $4.41 million for the third quarter, compared to a loss of $606,000 in the same period a year ago. It cited higher loan-loss provisions and a writedown on its investment in Fannie Mae, the government sponsored mortgage company.

The bank, in the suburbs of Washington, D.C., had a loss of $1.49 million for the first nine months, versus a loss of $3.1 million in the same period of 2007.

Intervest Bancshares Corp., of New York, announced that it had been approved to sell $25 million in preferred stock to the government. Its earnings for the third quarter were down nearly 46 percent from the same period last year, in part because of higher loan loss provisions. However, it said its non-performing assets as of Sept. 30 were down 14.6 percent from a year earlier. Intervest has branches in New York and Florida.

MidSouth Bancorp, of Lafayette, La., said it would get $20 million in taxpayer capital. MidSouth's earnings for the third quarter were down 23.9 percent from a year ago, and earnings for the first nine months were down 35 percent. The company attributed the declines primarily to increased spending on expansion.

C&F Financial Corp., based in West Point, Va., also said it would get $20 million. Its earnings for the third quarter were down by nearly 54 percent, because of higher loan-loss provisions and a writedown on its investment in Fannie Mae and Freddie Mac, another government sponsored mortgage company.

The Treasury Department plans to buy $250 million of preferred stock in U.S. banks as an economic stabilization measure under the $700 billion Troubled Asset Relief Program. The stock will pay an annual dividend of 5 percent for the first five years and 9 percent thereafter. The Treasury Department also will get warrants to buy common stock in participating banks, which could provide a return to taxpayers if the shares increase in value as the banks' fortunes improve.

First Litchfield Financial Corp., of Litchfield, Conn., said it was approved to sell $10 million in stock to the government. CNB Financial Corp. of Worcester, Mass., will get $7 million, and Northeast Bancorp, of Lewiston, Maine, will get $4.2 million.

First Bankshares Inc., based in Suffolk, Va., said it would get $3.5 million in government capital. Community 1^st Bank, of Roseville, Calif., will get $2.55 million.

The $14 billion in aid that Congress rejected for the Big Three automakers is less than the amount of new capital the Treasury Department provided to four banks with heavy concentrations of business in vehicle and parts producing states.

The Treasury Department bought $7.7 billion of preferred stock in PNC Financial Group Inc. , of Pittsburgh, which in turn agreed to absorb National City Corp., an Ohio bank that was considered too weak to qualify for taxpayer investment.

The Treasury Department also invested $3.4 billion in Fifth Third Bancorp, of Cincinnati, $2.5 billion in Keycorp, of Cleveland, and $2.25 billion in Comerica Inc., which has headquarters in Dallas but previously called Detroit home.

That money, a total of  $15.85 billion, came in the form of direct capital investment rather than loans, as the automakers are seeking. And it came with very few conditions, other than reduced tax deductions for executive compensation, restrictions on "golden parachute'' payments for departing executives and limits on dividend increases and stock buybacks.

Republicans in the Senate said they rejected the $14 billion loan package for the Big Three because the United Auto Workers refused to go along with a provision that would have substantially reduced wages and benefits beginning next year.

The Bush administration said Friday that it would consider tapping some of the $700 billion allocated by Congress for the Troubled Asset Relief Program to help keep the automakers solvent and avert a domino effect of supplier bankruptcies.

Chrysler LLC and General Motors Corp. say they are running low on cash and need more than $10 billion by the end of the year to pay suppliers for parts and to cover other expenses. Ford says it has enough cash to make it through 2009.

Michigan ranks first in the nation in auto assembly and parts employment, with 202,410 jobs, according to an analysis by CNNMoney.com. Ohio is second, with 111,218 jobs, followed by Indiana, with 84,025. It's a safe bet that many of the customers of the auto-state banks getting TARP money are employed in the auto industry or rely on it in some way. If their jobs are threatened by the industry's turmoil, then the financial strength of the banks could be threatened, too, along with the taxpayer investment in them.

The language in the bill that created the Troubled Asset Relief Program does not specifically mention automakers among the types of companies eligible for taxpayer aid. But the legislation gives Treasury Secretary Henry M. Paulson Jr. broad leeway in determining how best to use the money, and which companies get it.

Paulson is the former chairman and chief executive officer of Goldman Sachs Group Inc., which was one of the investment banks that provided financing for Cerberus Capital management LP's purchase of 80 percent of Chrysler in 2007. Paulson had left Goldman Sachs for the Treasury Department the previous year. And Goldman Sachs has reduced its exposure on the Chrysler deal, selling at least half of its $1.6 billion in debt securities.

Goldman Sachs got $10 billion in government investment through the TARP program. Three other banks that were big recipients of taxpayer capital through TARP also provided big chunks of the $7 billion in financing that Cerberus used to buy Chrysler.

Those banks -- Citigroup Inc., J.P. Morgan Chase & Co., and Morgan Stanley -- sold a total of $60 billion of their preferred stock to the government. It is not clear how much Chrysler related debt they still hold. 

Congress authorized the first $350 billion of the TARP money in October. The Treasury Department has already parceled out most of that money. The bulk of it, $250 billion, is going to buy preferred stock in banks. Another $40 billion went toward an emergency rescue plan for American International Group Inc. 

The Treasury Department had to come up with an additional $20 billion in November to help shore up Citigroup, on top of the $25 billion the bank already received through the stock purchase program. In addition, Paulson committed $20 billion of the TARP money for a program designed to revive the market for securities backed by consumer loans.   

The Treasury Department has approved 20 more banks to sell preferred stock to the government under the $700 billion Troubled Asset Relief Program. The companies accepted over the past few days will get $960 million in public investment.

Fulton Financial Corp., the parent of Columbia Bank, will get the biggest chunk of that money.  The Lancaster, Pa.-based company was approved to sell $375 million in stock to the government. It reported in October that its earnings for the third quarter were down 13.4 percent because of charges related to securities investments and an increase in reserves for loan losses. The bank also said that its deposits had fallen by $374.6 million, or 3.6 percent.

Central Pacific Financial Corp., of Honolulu, said it was approved to sell $135 million in stock to the Treasury Department. The bank posted a surprise $146.3 million loss in the second quarter, after taking big charges to cover the reduced value of some California real estate loans and other real estate-related assets. It returned to profitability in the third quarter.

Heartland Financial USA Inc., based in Dubuque, Iowa, said it was approved for $81.7 million in taxpayer investment. Independent Bank Corp., of Rockland, Mass., said it would get $78 million. The company, which operates Rockland Trust,  announced last month that it would acquire Benjamin Franklin Bancorp in a deal valued at $125 million.

Seacoast Banking Corp. of Florida, based in Stuart, Fla., was approved to sell $50 million in stock to the Treasury Department. Cadence Financial Corp., of Starkville, Miss., was approved for $44 million, and Sterling Bancorp  of New York, was approved for $42 million.

A Congressional oversight panel keeping tabs on the $700 billion Troubled Asset Relief Program said Wednesday the Treasury Department must monitor the recipients of government aid more closely, and must spell out more clearly who qualifies for aid. 

The newly formed Congressional Oversight Panel for Economic Stabilization said in its first report that the Treasury Department needs better methods for evaluating how banks and other recipients use their taxpayer funding, and what impact it has on the economy.

"If the funds committed under TARP have an intended purpose and are not merely no-strings-attached subsidies to financial institutions, then it seems essential for Treasury to monitor whether the funds are used for those intended purposes,'' the panel said. "Without that oversight, it is impossible to determine whether taxpayer money is used in accordance with Treasury's overall economic stabilization strategy. Treasury cannot simply trust that the financial institutions will act in the desired ways; it must verify.''

The group, headed by Harvard University law professor Elizabeth Warren, called for more transparency in the Treasury Department's process for picking which banks get  government investments through the $250 billion capital purchase program.

"The Oversight Panel believes it is critical for Congress and the public, including participants in the banking industry, to understand exactly what the criteria are for receiving money under the TARP programs; what the strategic intentions of the criteria are, if any; what the strategic effects of the criteria area, and how the criteria advance the purposes of the Act."

The panel noted that some critics have questioned whether the government stock purchases will give some of the banks that receive the money a competitive advantage over banks that choose not to apply.

One member of the oversight panel, U.S. Rep. Jeb Hensarling, did not give his approval to the report. Hensarling, a Republican from Texas who voted against the TARP legislation, suggested in a prepared statement that the panel was rushed in preparing the report, and that the document did not represent a truly bipartisan effort.

Hensarling expanded on those comments in testimony before the House Fianncial Services Committee.

Neel Kashkari, the Treasury Department official overseeing TARP and other economic stabilization efforts, also gave testimony at the hearing..

The oversight panel said it would release its next report, on the administration of the TARP program, Jan. 10. It plans to release another report on Jan. 20, providing recommendations for reforms to the financial regulatory structure.

Five more banks have announced their acceptance into the Treasury Department's capital purchase program. They will receive as much as $242.2 million of the $250 billion that the government plans to inject into U.S. financial institutions.  

1^st Source Corp., based in South Bend, Ind., said it was approved to sell up to $111 million in preferred stock to the government. The company, which serves northern Indiana and southwestern Michigan, said it was still weighing whether to go ahead with the deal.

"1st Source is already well capitalized so we must balance the additional good we may be able to accomplish in our community and for our clients against this relatively expensive equity investment by the federal government,'' said Christopher J. Murphy III, chairman and chief executive officer.

The company reported a slight drop in profits for the third quarter and first nine months of the year, citing an $8.07 million charge for its investment in Fannie Mae and Freddie Mac, the government-sponsored mortgage companies that were put into conservatorship in September. On the same day it announced its results, 1^st Source announced a 14.3 percent increase in its quarterly stock dividend.

West Bancorporation Inc., of West Des Moines, Iowa., said it was approved to sell $36 million in stock to the Treasury Department.  It is the first bank in Iowa to gain admittance to the program. West Bancorporation lost $360,000 in the third quarter, compared to a profit of $4.95 million in the same period of 2007. It had previously announced that it lost $4 million on loans to a customer that had been the victim of fraud, and $1.72 million on  an unsecured note issued by bankrupt Lehman Brothers Holdings Inc.

BNC Bancorp, based in Thomasville, N.C., is getting $31.3 million in government money. It said it would use the additional capital for general corporate purposes, with an emphasis on meeting the needs of its customers and the communities it serves. BNC is the parent company of the Bank of North Carolina. Its earnings for the third quarter fell nearly 43 percent, with provisions for bad loans doubling from the same period a year earlier.

Crescent Financial Corp., of Cary, N.C., said it was approved to $24.9 million in preferred stock. Eastern Virginia Bankshares, of Tappahannock, Va., was approved for  $24 million.

LSB Corp., of North Andover, Mass., said it would get $15 million in government money. It is the parent company of River Bank, which has seven branches in Massachusetts and New Hampshire. LSB reported a loss of $8.3 million for the third quarter, largely reflecting a writedown on its investments in Fannie Mae and Freddie Mac, the government-sponsored mortgage companies.

Gerald T. Mulligan, LSB's president and chief executive, had harsh words for the Treasury Department after it took control of Fannie Mae and Freddie Mac.

"In my opinion, the hasty and ill considered U.S. Treasury conservatorship of Fannie Mae and Freddie Mac needlessly destroyed value and reduced capital in hundreds of well-run community banks that have been otherwise unaffected by, and blameless for, the problems confronting the national economy,'' Mulligan said when announcing LSB's quarterly earnings in October.

A coalition of 78 groups, led by the National Taxpayers Union and Openthegovernment.org, sent a letter to Congress today calling on representatives to make the financial-industry bailout program more transparent.

The letter noted that nearly half of the $700 billion approved for the Troubled Asset Relief Program has been allocated "with very little transparency and almost no oversight.'' The groups urged Congress to require the Treasury Department, the Federal Reserve and other agencies to collect information on how the bailout money is being spent by the recipients and to make their findings available to the public.

The groups said in their joint letter that the Federal Reserve -- which does not require Congressional approval to provide money to banks and other financial institutions -- has provided at least $800 billion in aid without providing any specifics.

"The public deserves vigorous, timely and easily accessible disclosure of all details surrounding any government decisions regarding financial market problems,'' the groups wrote. "We ask that you honor this by making sure that robust and effective oversight occurs and that all relevant records are collected and publicly available.''

The signatories included groups from various points on the political spectrum, including the American Conservative Union and Public Citizen, the organization founded by Ralph Nader. The Society of Professional Journalists also joined the effort, as did the Sunlight Foundation, a group dedicated to increasing access to public records.

The groups said that an estimated $8.5 trillion in taxpayer money has been committed to financial-rescue initiatives. That total includes capital investments in banks; loans and loan guarantees for financial institutions and businesses; restructuring aid to Fannie Mae and Freddie Mac, and other measures aimed at the housing and credit markets.

A dozen more banks have announced their acceptance into the Treasury Department's $250 billion capital purchase program, pushing the total number getting infusions of taxpayer money past the 150 mark.

The latest group of banks would get somewhere in the neighborhood of $365 million in public investment if they sell the maximum number of shares. The list includes two Virginia banks that are in the process of merging.

Hampton Roads Bankshares Inc., based in Norfolk, and Gateway Financial Holdings Inc., of Virginia Beach, said in a joint press release that they had been approved for $80.3 million in share sales. The two banks announced their merger Sept. 24. The Treasury Department approved Hampton Roads for $22.3 million in capital, and Gateway Financial for $58 million. Hampton Roads will be the surviving company.

Dime Community Bancshares Inc., which has headquarters in Brooklyn, N.Y., said it was approved to sell $77.3 million in preferred stock to the government. WesBanco Inc., of Wheeling, W.Va., was approved for $75 million.

Financial Instutions Inc., based in Warsaw, N.Y., said it would get $37.5 million in government capital. MutualFirst Financial Inc., of Muncie, Ind., said it was selected for the program but didn't specify how much money it had requested. Based on its reported assets of $1.4 billion, the maximum it could receive would be $42 million.

Monarch Bank, of Chesapeake, Va., announced that it had been approved for $14.7 million in public investment. Central Bancorp Inc., of Somerville, Mass., will get $10 million, and Coastal Banking Co. , of Beaufort, S.C. will get $9.95 million.

Old Line Bancshares Inc., of Bowie, Md., and Fidelity Bancorp Inc., of Pittsburgh, each were approved for $7 million. FPB Bancorp, based in Port St. Lucie, Fla., said it would get $5.8 million.

The capital injections are part of the Treasury Department's broader $700 billion Troubled Asset Relief Program. The preferred shares the banks are selling carry an annual dividend yield of 5 percent for the first five years, and 9 percent thereafter.

After more than 100 banks announced that their requests for capital injections from the Treasury Department had been approved, we started wondering why not a single bank had disclosed to investors that its application had been denied.

We found our answer this week in the report that the Government Accountability Office issued on the Treasury Department's oversight of the $700 billion Troubled Asset Relief Program (TARP). The report said that, through Nov. 21, none of the four regulatory bodies charged with screening applications had recommended to the Treasury Department that any of the banks or savings and loan be rejected.

Instead, the Federal Reserve, the Federal Deposit Insurance Corp., the Office of Thrift Supervision and the Office of the Comptroller of the Currency simply encouraged applicants who appeared unlikely to win approval to withdraw from the process.

No bank has publicly announced the withdrawal of its TARP application, either. National City Corp., a Cleveland bank that has been hit hard by losses on real estate loans, acknowledged that one reason it agreed to be acquired by PNC Financial Services Group Inc. was because it was clear that it would not receive federal aid.

The Treasury Department plans to inject $250 billion in capital into U.S. financial institutions by purchasing preferred stock that will give taxpayers an ownership stake in those companies, but not a say in their management. The shares carry an annual dividend of 5 percent for the first five years, and 9 percent thereafter. 

The GAO report said that the Treasury Department, in consultation with the regulatory agencies, developed a standardized process for evaluating the financial strength and viability of the applicants. But even though the Treasury Department's Office of Financial Stability has the final say on which banks get taxpayer money, the report makes clear that the winners are being selected by the same regulators that have been in charge of supervising them all along.

The Treasury Department said at the start of the process that it would not disclose the names of the banks rejected for aid by the Office of Financial Stability, headed by bailout czar Neel Kashkari. One fear is that making that information public might spook customers or investors, putting some of them in an even more precarious position.

But without knowing which financial institutions have been turned away from the capital purchase program -- and why -- taxpayers have no way to assess whether their money is being directed in the most effective manner. In addition to tracking the institutions that are getting money from the Treasury Department, BailoutSleuth will keep tabs on all that have announced applications, to see if we can spot some that have been politely denied.

We'll keep you posted on what we find.

The Treasury Department has approved public investments in 15 more banks over the past few days, adding nearly $1.5 billion to the total value of its announced deals.

The biggest beneficiary in the latest round of approvals is Colonial BancGroup Inc., which is based in Montgomery, Ala., and has branches in Alabama, Georgia, Florida, Texas and Nevada. It said in a press release that it was cleared to sell $550 million in preferred shares to the government.

Colonial said in late October that it lost $71 million loss for the third quarter, largely because of higher loss provisions for troubled loans. It took $121 million in chargeoffs, on top of $73 million the previous quarter. Its common stock fell more than 50 percent in one day after it reported its results. However, Colonial's shares have recovered some of that last ground since the company announced its acceptance into the Treasury Department program.

SVB Financial Group, of Santa Clara, Calif., will get $235 million in taxpayer money. It is the parent company of Silicon Valley Bank. SVB Financial reported profits of $27 million for the third quarter, off 29.1 percent from the same period last year.

United Bankshares Inc., which has dual headquarters in Washington D.C. and Charleston, W.Va., was approved for $197 million in new capital. The company has operations in four states and the District of Columbia. Its profits for the third quarter were down 24 percent from the previous year.

The new General Accountability Office report on the Treasury Department's administration of its $700 billion financial-industry rescue plan is long on broad assertions and short on detailed information.

But the document does provide specifics on the amount of money that certain contractors have received, or stand to receive, through the program.

According to the report, the two law firms assisting the Treasury Department with its capital investments in banks and other financial institutions were paid nearly $2.8 million for their first four weeks of work.

The Treasury Department said last month that its contracts with Hughes, Hubbard & Reed LLP of New York and Squire, Sanders & Dempsey LLP of Cleveland would be worth $5.5 million per firm for their initial six-month term.

The General Accountability Office reported that Hughes Hubbard was paid $1,411,300 through Nov. 25, while Squire Sanders received $1,380,000. Its summary did not say what hourly rates the firms were charging, or provide any other information about how their compensation was determined.

When the Treasury Department announced the contracts early last month, it redacted information on the financial terms from the copies it posted on its web site. BailoutSleuth filed a request for the full details of the agreements under the federal Freedom of Information Act. We were notified last week that the Treasury Department wants more information from us before it can process our request.

The GAO report said that the Treasury Department had contracted for $492,007 worth of services from Ernst & Young, which was hired last month to provide general accounting and consulting on the $700 billion Troubled Asset Relief Program. The watchdog agency said the Treasury Department had contracted for $191,469 in services from PricewaterhouseCoopers LLP, hired to provide internal controls for the program.

Both of those figures match the dollar amounts that the Treasury Department reported when it announced the contracts. Like the legal-services agreements, the contracts for accounting services posted on the Treasury Department's web site had numerous redactions.

The GAO also noted that Lindholm & Associates Inc., of Owings, Md., was awarded a human-resources support contract by the Treasury Department worth $174,720 for the initial term of six months, and $710,528 if all extension options were exercised.

The Treasury Department did not put out a press release on that contract, but Neel Kashkari, the agency's bailout czar, mentioned it in a public appearance on Nov. 10.

The GAO said in its report that 48 people had been assigned to the Troubled Asset Relief Program as of Nov. 21, including personnel from other Treasury Department offices and other federal agencies. It said that count included five permanent hires. The GAO said the program may eventually require the equivalent of 200 full-time workers.

The Government Accountability Office issued a critical report on the Treasury Department's $700 billion bailout program, saying it must develop better systems for ensuring that the recipients of taxpayer money use it for the intended purposes and comply with limits on executive compensation and shareholder dividends.

The GAO said the Treasury Department has yet to address key issues, such as figuring out how it will ensure that its plan to invest $250 billion in U.S. banks achieve the stated goals of stimulating lending to businesses and individuals.

The GAO suggested that the Treasury Department work with bank regulators to create a systematic method for determining and reporting -- in a timely manner - whether the actions of the financial institutions selling stock to the government are consistent with the aims of the program.

The report on the Troubled Asset Relief Program also noted that Treasury officials need better procedures for ensuring accountability and transparency, and for identifying and resolving conflicts of interest among the private companies that have been hired as contractors.

We're still in the process of analyzing the 66-page document. In the meantime, click on this link to read it for yourself:

Troubled Asset Relief Program:  Additional Actions Needed to Better Ensure Integrity, Accountability and Transparency.

Five more banks announced their participation in the Treasury Department's capital purchase program on Monday, including one that paid roughly $800,000 in severance to its president and chief executive when he retired Sept. 30.

Washington Banking Co., of Oak Harbor, Wash., said it had won approval to sell $26.4 million in preferred stock to the government. The company owns Whidbey Bank, which has 19 branches in the Puget Sound region.

Washington Banking had earnings of $1.9 million in the third quarter of 2008, off 32 percent from a year earlier. Net income for the first nine months was $6.7 million, compared with $7.5 million from the same period last year.

Washington Banking said part of the decline was attributable to the retirement package that CEO Michal D. Cann received when he stepped down. Cann announced his retirement on July 2, a few weeks after the company terminated its planned merger with Frontier Financial Corp. of Everett, Wash.

Washington Banking said the two events were not related. According to the Securities and Exchange Commission filing on Cann's severance agreement, he was to get two years of his base salary, calculated as the highest annual figure from the three previous years. He also was to get two times his most recently paid annual bonus, or two times the average of his three prior annual bonuses -- whichever was greater. In addition, Washington Banking gave him the title to a 2005 Chevrolet Tahoe he used for company business.

Cann's salary for the company's most recent fiscal year was $260,950. He was to collect half of his severance payment as a lump sum, and the other half in monthly installments through Sept. 30, 2009.

The other four banks that announced their participation in the Treasury Department's capital purchase program on Monday were First Financial Holdings Inc., based in Charleston, S.C.; TIB Financial Corp., of Naples, Fla.: Citizens South Banking Corp. of Gastonia, N.C.; and Seacoast Commerce Bank of Chula Vista, Calif.

First Financial Holdings said it was approved to sell $65 million in preferred stock to the Treasury Department. First Financial had net income of $22.6 million for its recently completed fiscal year, down 10 percent from the previous year.

TIB Financial said it would receive $37 million in taxpayer money through the government's capital purchase program. The company posted a loss of $2.2 million in the third quarter, compared to a profit of $494,000 in the same period last year.

Citizens South was approved for $20.5 million in new capital. Seacoast Commerce Bank, which operates from a single branch and primarily serves individuals and small- and middle-market businesses, was approved for $1.8 million.

The Treasury Department plans to invest $250 billion in U.S. banks as part of the broader $700 billion Troubled Asset Relief Program.