Did big banks leave TARP too soon?
By Jennifer Liberto
@CNNMoney September 30, 2011: 5:35 AM ET
Former FDIC Chair Sheila Bair pushed for the big banks to be held to tougher capital standards before they exited TARP.
WASHINGTON (CNNMoney) — Regulators were under pressure to cut the biggest banks loose from the Wall Street bailout program, a federal watchdog said in a report issued Friday.
Congress and regulators made it easier for the biggest banks to pay back tens of billions of dollars borrowed under the Troubled Asset Relief Program (TARP), according to a Friday report released by the Special Inspector General for TARP.
The report zeroed in on regulators who ignored their original requirements to ensure eight of the weaker big banks had enough of a capital cushion when they exited TARP.
The report suggests that if regulators had required Bank of America (BAC, Fortune 500), Wells Fargo (WFC, Fortune 500) and PNC Financial Services (PNC, Fortune 500) to raise asmuch capital as Citigroup (C, Fortune 500) had to, the banks may have been in a stronger position.
Regulators had wanted banks to issue at least one dollar in new common equity for every two dollars they borrowed from the federal government. In many cases, that didn’t wind up happening.
“Regulators leveraged TARP repayment requirements to improve the quality of capital held by the nation’s largest financial institutions in the wake of the financial crisis, but relaxed those requirements shortly after establishing them,” the report warned