Bailed-out bank's deals raise concerns

[girl gone mad]

Bailed-out bank's deals raise concerns
http://www.sacbee.com/ourregion/story/1963763.html">Sacramento Bee

Community Business Bank in West Sacramento has weathered the financial crisis with a swagger that competitors might envy. It recently announced plans to increase lending and perhaps buy a bank hammered by the economic downturn.

The small lender can ponder such moves in a dismal economy because it reinforced its capital with about $4 million from the Troubled Asset Relief Program, known as TARP. The deal seems to show the federal bailout at its best – priming the economic pump in a distressed region.

Beneath the surface, Community Business Bank demonstrates flaws in the federal program: TARP props up small banks with risky practices, few strings attached. Rather than enforcing prudence, TARP underwrites business as usual.

A Bee investigation of internal shareholder documents and public lending records found that at Community Business Bank, those likely to benefit most from the taxpayer-funded windfall are a small group of insiders and their associates. From its inception 3 1/2 years ago, the bank has steered many of its assets to a handful of directors, as well as their relatives and business partners.

By early last year those property investors had drawn down as much as one-third of the bank's loan portfolio of more than $100 million, deeds of trust showed. The bank has loaned more to its own directors than about 90 percent of banks "similar in size and economic environment," according to the Federal Deposit Insurance Corp.

http://www.sacbee.com/ourregion/story/1963763.html">More...

[RandomThoughts]

1. It might be that many of the bankers

think that if they get to create money out of nothing, they might as well loan it to themselves. Sounds like a conflict of interest, I think that use to be called embezzlement.

[natrat]

2. government culture is truely surreal today

[truedelphi]

3. I thought that banks could loan out to themselves up to

90% (or even 95%) of all their worth.

This got discussed way back in the day when Bert Lance, a friend of Carter's, had his ass hauled into Congress to testify about his money deals.