WASHINGTON — A massive backlog of bank applications for emergency federal aid has provoked widespread frustration over how the Treasury Department is allocating rescue funds and raised suspicions among executives that political connections are playing a role, industry officials and regulators say.
The delay is pushing bank executives across the nation to lobby their lawmakers, financial groups and friends within the federal government to try to expedite their requests.
“I think there is a suspicion among a large number of our members that it’s who you know rather than the merits of the application,” said Camden Fine, chief executive of the Independent Community Bankers of America. “I don’t know that to be a fact, but I know there is a strong undercurrent of suspicion among my members that you have to have some sort of connection before you get the golden touch or the blessing from Treasury to get money.”
Since Treasury officials announced the program in October to inject federal aid into banks in exchange for equity stakes, about 350 banks have received the money, a fraction of the 1,600 that have asked, according to regulators.
Treasury officials have been secretive about why certain banks received the money first, citing the need to protect sensitive market information. But lawmakers and industry officials have widely criticized their decisions as opaque and inconsistent.
Community bank executives and industry officials said that while Bank of America and Citigroup executives are able to dial up senior officials at the Treasury and the Federal Reserve and quickly receive tens of billions of dollars in federal aid, the heads of midsize and smaller institutions must wait months.
“What I do have a huge problem with is the double standard that my government is using,” Tom Mork, chief executive of Lakeview Bank in Lakeville, Minn., wrote in a letter to financial associations and the congressional delegation from his state. The “public has no clue about what is happening behind the scenes. My hunch is that if they understood that their local bank declined their loan request because the capital they require to continue growing is being unfairly distributed to the very institutions that caused this mess, they too would be outraged.”
Rep. Barney Frank, D-Mass., who leads the House committee that wrote much of the bailout legislation, acknowledged yesterday that his intervention on behalf of a bank in his home state helped the firm win federal aid.
Frank successfully appealed to Treasury officials on behalf of OneUnited, which he described as the only African-American-owned bank in Massachusetts. When writing the legislation, Frank included language to make sure banks like OneUnited would be eligible for some of the cash.
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