02:00 PM
Connect Directly

TARP Can’t Stanch Financial Crisis, Experts Say

The government's $700 billion bailout program isn't enough to get credit flowing, experts say.

See related sidebar: TARP May Need Tech Vendors: Kashkari Intimates

The other shoe is about to drop," said Gerard Cassidy, managing director of bank equity research with RBC Capital Markets (US$1.6 billion in assets), the investment banking arm of Toronto-based Royal Bank of Canada, referring to a crisis in commercial lending. Cassidy was speaking at the Securities Industry and Financial Markets Association's (SIFMA) November summit on the Troubled Asset Relief Program (TARP).

Though Cassidy added that thanks to TARP, RBC now expects 200 banks to fail, down from 300 predicted earlier this year, speakers at the SIFMA event agreed that the U.S. government's $700 billion bank bailout program is insufficient to spur lending because banks still have far from an optimal balance of debts to assets. The lack of available credit will bring many businesses to a halt, speakers forecast.

According to experts, after the TARP fund is exhausted at least another $600 billion in global loan losses will remain. And now TARP is unlikely to purchase bad loans to help banks' balance sheets -- its original intention. Two days after the Nov. 10 SIFMA summit, Treasury Secretary Henry Paulson said in a statement: "[P]urchasing illiquid mortgage-related assets ... at this time ... is not the most effective way to use TARP funds."

In the interim, American Express (New York) had become a bank holding company -- specifically to gain access to TARP funding, some observers contend.

While Paulson did not refer directly to Amex, he said the credit card market had almost "ground to a halt," that "both banks and nonbanks may well need more capital" and that future TARP funding directed at institutions might depend on "matching investments" from the private sector. Recipients, Paulson stressed, "have responsibilities in the areas of lending ... and foreclosure mitigation."

In remarks at the SIFMA event, Neel Kashkari, the interim assistant secretary of the Treasury for financial stability, who oversees TARP, defended the lack of lending to date by the nine banks -- which represent half of U.S. bank assets -- that received the initial $250 billion cash injection. "Less than half the money is out the door," he noted. Kashkari went on to encourage "potentially thousands" of other banks to apply for TARP funding.

A "backlash" among banks disgruntled over how funding is decided was forecast by William Seidman, former chairman of both the FDIC and Resolution Trust Corp., the government body that bought distressed properties after the savings and loan crisis of the late 1980s. "It's not entirely clear, even after this morning [when Kashkari presented]: Are they going to bolster the good banks or the bad banks?" Seidman, SIFMA's lunchtime speaker, said.

Comment  | 
Print  | 
More Insights
Newest First  |  Oldest First  |  Threaded View
Register for Dark Reading Newsletters
White Papers
Cartoon Contest
Write a Caption, Win a Starbucks Card! Click Here
Latest Comment: This is a secure windows pc.
Current Issue
Security Operations and IT Operations: Finding the Path to Collaboration
A wide gulf has emerged between SOC and NOC teams that's keeping both of them from assuring the confidentiality, integrity, and availability of IT systems. Here's how experts think it should be bridged.
Flash Poll
New Best Practices for Secure App Development
New Best Practices for Secure App Development
The transition from DevOps to SecDevOps is combining with the move toward cloud computing to create new challenges - and new opportunities - for the information security team. Download this report, to learn about the new best practices for secure application development.
Twitter Feed
Dark Reading - Bug Report
Bug Report
Enterprise Vulnerabilities
From DHS/US-CERT's National Vulnerability Database
Published: 2017-05-09
NScript in mpengine in Microsoft Malware Protection Engine with Engine Version before 1.1.13704.0, as used in Windows Defender and other products, allows remote attackers to execute arbitrary code or cause a denial of service (type confusion and application crash) via crafted JavaScript code within ...

Published: 2017-05-08
unixsocket.c in lxterminal through 0.3.0 insecurely uses /tmp for a socket file, allowing a local user to cause a denial of service (preventing terminal launch), or possibly have other impact (bypassing terminal access control).

Published: 2017-05-08
A privilege escalation vulnerability in Brocade Fibre Channel SAN products running Brocade Fabric OS (FOS) releases earlier than v7.4.1d and v8.0.1b could allow an authenticated attacker to elevate the privileges of user accounts accessing the system via command line interface. With affected version...

Published: 2017-05-08
Improper checks for unusual or exceptional conditions in Brocade NetIron 05.8.00 and later releases up to and including 06.1.00, when the Management Module is continuously scanned on port 22, may allow attackers to cause a denial of service (crash and reload) of the management module.

Published: 2017-05-08
Nextcloud Server before 11.0.3 is vulnerable to an inadequate escaping leading to a XSS vulnerability in the search module. To be exploitable a user has to write or paste malicious content into the search dialogue.

Dark Reading Radio
Archived Dark Reading Radio
In past years, security researchers have discovered ways to hack cars, medical devices, automated teller machines, and many other targets. Dark Reading Executive Editor Kelly Jackson Higgins hosts researcher Samy Kamkar and Levi Gundert, vice president of threat intelligence at Recorded Future, to discuss some of 2016's most unusual and creative hacks by white hats, and what these new vulnerabilities might mean for the coming year.