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Congress passed the administration's $700 billion rescue plan, officially called the Troubled Asset Relief Program, or TARP, in September as a means of strengthening banks and getting credit flowing again. Of that $250 billion is earmarked for Treasury's capital purchase program, which allows the government to invest directly in banks in return for preferred stock. In the past two weeks, the Treasury has indicated it is considering expanding the capital investment program to include insurers, whose investment portfolios have been hit hard as stocks and corporate bonds have plunged in value. If TARP money is going to the FDIC-insured banking subsidiaries, then bankers should have few concerns, said ABA's Wayne Abernathy. Direct investment in their parent companies, however, "needs to be thought through carefully." Abernathy said. "The concept behind TARP is not to save sick institutions but to enable healthy institution to lend more." It's still too early to tell whether government investments in banks are paying off. A Federal Reserve Board report issued Monday indicated that banks continued to tighten standards for all types of lending through the end of the third quarter. - Bill McConnell See the Fed's 3Q survey on lending standards Bill McConnell is The Deal's Washington bureau chief. Categories![]()
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