The FDIC are asking banks who received bail out funds to monitor how they are using money received from the $700 billion recovery fund.
According to an article at Associated Press:
“Banks are expected to document how they are continuing to meet the credit needs of creditworthy borrowers,” the directive says. “The FDIC expects that … (institutions) will deploy funding received from these federal programs to prudently support credit needs in their market and strengthen bank capital.”
The FDIC also says they want to hear the “story” of how the banks are helping ease the credit crisis, increase lending and prevent foreclosure ; but I have a sneaky suspicion that because there are no teeth (meaning punishment for not monitoring use of the money) in this “directive” many banks will offer us P.R. pieces as “proof” of how they are making a difference.
But the proof is in the pudding as they say. Have foreclosures decreased? Has lending increased? The answer is no and no. But, this is a step in the right direction. The FDIC should have made this request before handing out the money to these banks.
Homeowners facing foreclosure and/or filing for bankruptcy are required to monitor and prove how they are using their money, why not banks? It is not enough for the FDIC to simply ask the banks to prove how they are increasing leading and preventing foreclosures, they need to force them to keep accurate, statistically sound evidence of how they are increasing lending and preventing foreclosure. We don’t just want “stories” we want hardcore evidence.