Bank of New York Mellon's TARP deal worth $20 million

The Government Accountability Office has spilled one of the Treasury Department's TARP secrets, revealing the value of the Bank of New York Mellon's contract to serve as master custodian for the financial-industry rescue program.

In a report issued late last week, the GAO estimated that Bank of New York Mellon would receive $20 million over three years.

The Treasury Department hired Bank of New York Mellon in October to keep tabs on the assets it would buy and sell through the $700 billion Troubled Asset Relief Program. But when it posted the contract on its web site, it blacked out the portion outlining how much the bank would be paid and how that pay would be calculated.

Since then, the Treasury Department has declined to disclose the terms of the deal. BailoutSleuth filed a Freedom of Information Act request in November, seeking an unredacted version of the agreement. More than two-and-a-half months later, we have yet to receive a decision from the Treasury Department on our request.

But the GAO filled in some of the blanks about Bank of New York Mellon's compensation in one of its periodic reports on transparency and accountability issues surrounding the TARP initiative - which include taxpayer investments in banks, loans to automakers, and government guarantees on certain portfolios of troubled assets.

The GAO's 112-page report included a summary of TARP contracts showing that Bank of New York Mellon was to receive an estimated $20 million through Oct. 14, 2011. The report noted that the company's compensation for the custodian job was based on flat fee, plus a fixed percentage of the asset values under its watch.

Bank of New York Mellon's contract is by far the largest that the Treasury Department  has awarded to any of its financial or legal advisors on TARP. The next biggest deals were with two law firms, Hughes Hubbard & Reed LLP and Squire Sanders & Dempsey LLP, which got contracts worth $5.64 million and $5.52 million, respectively.

The Treasury Department did not respond to our request for comment on the GAO's disclosure. Bank of New York Mellon referred us to the Treasury Department, saying it was the customer's prerogative to discuss the details of contract.

Bank of New York Mellon has more than $23 trillion in assets under custody and administration. It was one of 70 companies that submitted proposals for the job, which includes helping with custodial services, accounting, auction management and other tasks. Of those, 10 met all of the Treasury Department's eligibility requirements.

Bank of New York Mellon also sold $3 billion of its preferred stock to the government in October, as part of the Treasury Department's plan to inject capital into banks to shore up their balance sheets and spur lending.