The Merrill Lynch executive has one problem to contend with.
It’s official. Herb Allison, the former director of the New York Stock Exchange, is heading the Treasury Department to oversee the $700 billion TARP fund. He will replace outgoing chief Neel Kashkari who has been connected with the office since the Bush administration. Allison will be tasked to bring back the housing market to recovery by making sure that the bailout fund is used to increase bank lending. In his previous post, Allison will be replaced by COO Michael Williams who also holds extensive mortgage experience in Fannie Mae.
While that may come as good news to the housing industry, we think it certainly doesn’t have any effect on the recipient banks after all. For one, these institutions have all refused to divulge their expenses using the rescue fund. Allison will have a tougher time in getting these banks to surrender their covert fund usage. That’s a tough call for someone who may have a wide experience in investment banking and barely seven months in Fannie Mae.
While dollar tracking is obviously not an easy task, the Congress would still have to demand from banks an exact proof of where taxpayers’ money has gone to. It’s no secret that a large chunk was used to acquire smaller banks but none of them are admitting the truth anyway.
But why is their no accountability in the first place? It’s because everyone was in a hurry to pour in the dollars without creating a better oversight committee. So before we accuse banks of irresponsibility, the Bush administration should also take the blame for this.
Should Allison track down the capital-cushion-turned-acquisition fund, we believe that the banks still have engaged in riskier operations.