by Brian Mahany
The Inspector General for the federal government’s Troubled Asset Relief Program (TARP) issued a stinging report criticizing both small banks and the government itself. One TARP program, the Small Business Lending Fund, was intended by Congress to jump start the economy by getting loans to small business. Instead, some banks simply took the money. Unfortunately, we are not surprised.
Usually we are fans of small banks and harsh critics of the “Too Big To Fail” giant banks like Wells Fargo and Bank of America. Unfortunately, the smaller banks have some bad apples too.
Congress set aside $30 billion so that small banks could write small business loans. According to the Inspector General’s findings, however, only $4 billion of that money was used and half of that wasn’t even used for small business lending.
Where did the money go? We were shocked to learn that some banks – 137 of them – simply used the money to pay off other monies they owed the government. In other words, they took money earmarked for small business and used it for themselves.
Before condemning these 137 banks for misusing our tax dollars, the government shares a huge part of the blame. The Inspector General says that regulators knew where the money was going and how it was being misused and did nothing. “By not developing and implementing meaningful [review procedures], Treasury and the regulators lost sight of Congress’ primary goal of the program — to increase lending to small businesses,” quotes the report.
Will any “heads roll”? Probably not. We may seek to privately prosecute some banks under the federal False Claims Act, however. Although regulators may have looked the other way, banks still had an obligation to use our tax dollars in the way specified by Congress. While these same banks may complain that the Comptroller of Currency or Treasury allowed them to misuse the money, we hope a jury of taxpayers will see through that argument.
As our parents and teachers taught us when we were children, two wrongs don’t make a right.
If you worked for or audited a bank that misused TARP funds, we want to hear from you. The False Claims Act (sometimes called the whistleblower law) allows people with inside information of wrongdoing to receive a percentage of whatever monies are recovered on behalf of the government and taxpayers. Banks have been the target of many successful whistleblower complaints for a wide variety of mortgage fraud and lender liability issues. If you have information about such frauds, we want to speak with you.
Mahany & Ertl – America’s Fraud Lawyers. Offices in Milwaukee, Wisconsin; Detroit, Michigan; Minneapolis, Minnesota; Portland, Maine and San Francisco, California. Services available in many jurisdictions.
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