America's Bailout Program Benefited Foreign Countries, Oversight Panel Finds

TARP greatly helped foreign banksThe Congressional Oversight Panel released its August oversight report Thursday and it wasn't impressed with the way TARP money flowed into international hands -- especially foreign banks whose governments should have shared the bailout burden. The watchdog group has urged Treasury to collect and report more data about the international use of TARP funds and to document the TARP's impact overseas.

The panel's report, The Global Context and International Effects of the TARP, explains how the financial crisis that peaked in 2008 exposed the interconnectedness of the global financial system. Although the crisis began with subprime mortgage defaults in the U.S., its damage spread rapidly overseas and the "result was a truly global financial crisis."

The U.S. responded by setting up the $700 billion Troubled Asset Relief Program (TARP) in 2008 as a rescue fund for banks. Other countries followed suit with similar efforts, however, the overseas funds were not distributed in the same way. America simply flooded the financial markets with money to stabilize the system, aiming to help as many banks as possible, including those with significant overseas operations. But most foreign nations targeted their funds to save individual institutions, often those with no major U.S. operations.

"In the end, the U.S. pumped capital into more than 700 banks," Elizabeth Warren (pictured), head of the panel, said, "while all other G8 nations combined reached fewer than 50 banks." Warren adds, "The result appears to be that America's rescue had much greater impact internationally than their rescue programs had on the U.S."

U.S Could Have Asked Foreign Beneficiaries to "Share the Pain of Rescue"


The committee found that this outcome was likely inevitable given the structure of the TARP. But it pointed out that "if the U.S. government had gathered more information about which countries' institutions would most benefit from some of its actions, it might have been able to ask those countries to share the pain of rescue." The report noted the ripple effect of the AIG (AIG) bailout:
For example, banks in France and Germany were among the greatest beneficiaries of AIG's rescue, yet the U.S. government bore the entire $70 billion risk of the AIG capital injection program. The U.S. share of this single rescue exceeded the size of France's entire $35 billion capital injection program and was nearly half the size of Germany's $133 billion program.
Panel Calls for Increased Stress Tests and "War Games"

The panel found that policymakers were ill-prepared for such a worldwide crisis and that "the internationalization of the financial system has outpaced the ability of national regulators to respond." The group pressed for continued oversight:
The report recommends that Treasury collect data on cross-border flows of funds, increase the scope and frequency of stress testing on financial institutions, and collaborate with foreign policymakers on a cross-border resolution regime and for regular crisis planning and financial 'war games.'
The report includes an appendix with two tables that show direct and indirect foreign beneficiaries from the payments made to just one of AIG's domestic counterparties -- Goldman Sachs (GS).

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americawakeupnow

Here's the big picture. The Federal Reserve is NOT a branch of our government, but an independent world central bank that is controlling our economy!!! Tightening up the money supply and throwing America into a depression!!!
Americans need to wake up to the facts!!!
America Wake Up Now dot net

August 13 2010 at 12:21 AM Report abuse rate up rate down Reply
Bill

Does anyone see the big picture here?

August 12 2010 at 1:45 PM Report abuse rate up rate down Reply
Sonny

Hell Yes.......Bailout Nation.....Keep the money flowing.........

August 12 2010 at 1:16 PM Report abuse rate up rate down Reply
jkennedy806

YUP let's just bail everybody out but the people who helped infused this fund with their hard earned tax dollars. Where is my BAIL OUT/ my STIMUL US -- Keep the money at home, get our soilders out of Afgan/Iraq and put them in Texas, NM, AZ, and Calif. And VOTE these nit wit's out -- both Repub/Dem. Vote a 3rd party in -- no connections to the established crooks, banksters, and Wall Street mafia.

August 12 2010 at 12:56 PM Report abuse +1 rate up rate down Reply