WASHINGTON — The Treasury Department has not established a sound process for collecting dividend payments it is owed under the Troubled Asset Relief Program, a government report said Tuesday.
The Government Accountability Office said eight banks that took Tarp money failed to declare a total of $150,000 in dividends due to the Treasury. The GAO did not name the banks.
The report noted that the Treasury has yet to follow through on a promise to hire asset managers to oversee the dividend payments or to deal with the warrants it has purchased from banks.
"Without a more structured mechanism in place, and with a growing number of institutions participating in the program, ensuring compliance with these important aspects of the program will become increasingly challenging," the report said.
Under the guidelines for the Treasury's program, if a participant misses six dividend payments the government has the right to replace two of its board members.
Compliance with executive compensation limits and other requirements imposed on participants is also currently left to the participants themselves, the GAO said. The report said the Treasury has not taken any steps to verify the information provided in documents the banks produce on these issues.
"We continue to believe that Treasury should develop a formal system to help ensure compliance with the agreements," the report said.
It also criticized the contradictory guidance on the procedure for issuing stock warrants. The GAO found four different sets of instructions on how to determine the date on which warrant prices should be based. The agency recommended issuing guidance to clear up the confusion created by the conflicting directions.
A separate report, released late last month by the Federal Deposit Insurance Corp.'s inspector general, found the FDIC had recommended capital infusions for a quarter of its institutions that had asked for funds.
The report said the FDIC, which takes roughly a month to process applications, had recommended 408 of 1,615 applications. Of those, 267 had received the funds.
The report said it was rare for the agency to outright deny an application, and institutions more typically withdraw either voluntarily or with FDIC influence. Of 57 FDIC-supervised banks that had withdrawn as of Dec. 10, 24 did so at the agency's suggestion, with the most common reason being a Camels rating of 4 or 5.