A new audit released today by the Special Inspector General for the Troubled Asset Relief Program (SIGTARP) confirms concerns raised by the Project On Government Oversight (POGO) about insurance companies gaining access to bailout funds that were intended for banks.
The SIGTARP's audit examined the use of TARP funds by six firms, including two large insurance companies: Hartford Financial Services Group and Lincoln National Corporation. Hartford and Lincoln were able to obtain a total of $4.3 billion in taxpayer funds under the TARP's Capital Purchase Program (CPP), even though the Treasury Department claimed that CPP funds would be used to "invest up to $250 billion in U.S. banks that are healthy, but desire an extra layer of capital for stability or lending" (emphasis POGO's).
As POGO pointed out in a letter to Congress last December, Hartford and Lincoln were able to qualify for these funds by acquiring smaller banks and thrift savings institutions. POGO noted at the time that "these companies' back-door efforts to access TARP funds is a violation of the spirit, if not the letter, of the [Emergency Economic Stabilization] Act and does not comport with the real interests of the taxpayer."
The SIGTARP's audit echoed POGO's concerns, finding that the participation of these insurance companies "was incongruous with the spirit and intent of the CPP program." Moreover, the SIGTARP reported that the amount of CPP funds provided was determined by the assets of the parent insurance companies, not just the assets of the smaller thrifts, and that the companies ended up using little or no CPP funds to support the activities of the smaller thrifts.
"The public has every right to be upset about large insurance companies hiding behind small banks in order to feed at the TARP trough" said POGO Executive Director Danielle Brian. "This just confirms that Treasury needs to do a much better job of enforcing the terms of its own bailout programs, and ensuring that TARP recipients aren't abusing taxpayer funds."