Federal regulators 'succumbed to banks' in bailout program

3 October 2011

Federal regulators in the US have been succumbing to increasing pressure from large banks looking to swiftly depart from the financial bailout program, a new study has shown.

This is the finding of a new watchdog report from the office of Christy Romero, the inspector general for the taxpayer bailout package, which also showed lenders have not applied the government's guidelines for repaying the taxpayer funds.

According to the investigation, a number of regulators bowed to pressure heaped on them from financial institutions in 2009 and later served to relax the requirements of the conditions.

One of the outcomes of such a focus was that the process to review a Troubled Asset Relief Program bank's exit proposal was inconsistent.

Lenders sought to use cheaper alternatives to issuing common stock in the form of selling assets or issuing preferred stock, the report found.

In addition, Citigroup - which is split into Citicorp and Citi Holdings - was the only institute to meet the one-for-two payback required.

By Gary Cooper

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