Lincoln Financial Games the TARP System
Posted by Jeff Pruitt - 2/1/10 @ 11:04 am - Filed Under Featured, Local Politics, National Politics
Apologies if this has been reported elsewhere as the information is about a month old but given Lincoln’s ties to Fort Wayne I thought it would be of interest. In December, the Special Inspector General for the TARP (that’s the $750 Billion bank bailout) issued a report regarding the usage of TARP funds by various institutions.
The report highlights how Lincoln Financial bought a hole-in-the-wall bank in order to become eligible for TARP funds. Had the bank itself applied for TARP funds it would’ve only been eligible for $350k but Lincoln was able to buy this bank for ~$10 Million and then receive $950 Million in TARP funds. Keep in mind that without this purchase Lincoln would not have been eligible for any TARP funds. And to top it off, they haven’t used any of the money towards the bank’s activities but have instead used all of it to shore up their insurance business.
Here’s the relevant info from the SIGTARP report (PDF, p14):
H/T - Mish
Hartford and Lincoln were able to obtain CPP funds by buying small thrift savings institutions and becoming thrift/savings and loan holding companies, thereby meeting the technical criteria for receipt of CPP funds. The amount of CPP funds provided, however, was then determined by the assets of the holding company (i.e., the parent insurance company), not just the assets of the much smaller qualifying thrifts. In the case of Lincoln, for example, the company was able to obtain $950 million in TARP funds after it acquired a thrift that, on its own, would have been able to obtain at most $350,000 (if it would have qualified for CPP funding at all). Moreover, in using TARP funds, there was no requirement that TARP funding be used in connection with the subsidiary thrifts’ activities. As it happened, the insurance companies reported that they used little (in the case of Hartford) or no (in the case of Lincoln) TARP funds in connection with the subsidiary thrifts’ activities but rather used the vast bulk of the funds to support their insurance businesses. Stated another way, simply by purchasing comparatively tiny thrifts, Hartford and Lincoln — companies whose primary businesses (unlike other CPP participants) have little to do with lending to consumers and businesses — gained access to more than $4.3 billion in taxpayer funds, an amount that is many multiples of the thrifts’ total assets.
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Very interesting!
Thanks for doing the legwork on this.