The Senate voted to authorize another $350 billion in spending on the Troubled Asset Relief Program, putting aside objections to the Treasury Department's handling of the first $350 billion.
Fifty two Senators voted to release the funds, while 42 voted to block them. Numerous Republicans who had voted in favor of the TARP legislation in October voted Thursday to block the second half of the funding, as did a few Democrats. It appears that the Senate imposed no new requirements or restrictions on the Treasury Department or the TARP recipients as a condition of releasing the funds.
The Treasury Department has fully allocated the initial $350 billion, with $250 billion of the money targeted for capital investments in
More than 300 banks have either received taxpayer capital through the TARP program or been chosen to receive it. Banks participating in the program sell preferred stock to the government that pays an annual dividend of 5 percent for the first five years and 9 percent thereafter. The government also gets warrants to buy additional stock, which could provide a return to the public if the banks' shares rise in value.
The Senate approved the second half of the TARP money on the same day reports surfaced that Bank of America Corp. may be seeking billions in additional aid to help solve the problems it inherited when it absorbed Merrill Lynch Inc.
Bank of America and Merrill Lynch were given $25 billion of the $250 billion targeted for bank investments.
Several large insurance companies are seeking to acquire financial institutions and convert to bank holding companies to tap into the second half of the TARP money. That could claim billions more of the new money.
Donald L. Kohn, the vice chairman of the Federal Reserve, said in testimony to Congress this week that the second $350 billion should be used to reduce foreclosures and strengthen banks, so they will become more willing to make loans.
Kohn also suggested that some of the money could be used for the original purpose of the TARP program - to buy distressed assets from banks to take them off of their balance sheets. After Congress passed the bailout legislation, Treasury Secretary Henry M. Paulson Jr. decided that injecting capital directly into banks would have a more immediate impact on their fortunes, and on the financial markets.
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