Treasury inspector general looking into bank investment

The Treasury Department's inspector general is reportedly looking into the government's investment in City National Corp., a Beverly Hills, Calif., bank holding company that got $400 million through the Troubled Asset Relief Program.

According to a story in the Los Angeles Times, the inspector general views City National as a test case for understanding how the Treasury Department and banking regulators determine which institutions get capital injections and which do not.

The company owns City National Bank, which has $10.5 billion in deposits and is known as the "bank to the stars'' because of the services it provides to many people and companies in the entertainment industry.

The Los Angeles Times report said the inspector general's office did not identify City National as the bank that is the subject of the inquiry, only that it was looking at the application and selection of one institution in Southern California.

The paper said the inquiry was not based on any possible wrongdoing by the bank.

The Treasury Department announced in October that it would use $250 billion of the $700 billion TARP package to make direct capital investments in banks, in the hope of strengthening their balance sheets and stimulating lending.

However, many of the banks that have been selected to receive taxpayer capital were already relatively strong financially. Critics of the government bailout program have questioned how those investments can help the economy.

Even the Treasury Department acknowledged in a report this week that it is difficult to track how the banks use the money and how the investments have contributed toward the original goals of the TARP legislation.