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Thu, Dec 25, 2008 - Page 10 News List

US Treasury gives aid to American Express, 92 banks

SPECIFIC PURPOSESThe Treasury gave approval for the banks to receive aid from the bailout fund though 14 of them do not have publicly traded stock

AP , WASHINGTON

The US Treasury Department says it has provided an additional US$4.7 billion to 92 banks as part of the government’s US$700 billion rescue of the financial system.

The department released a list of 49 banks that got final approval on Friday to receive US$2.8 billion. It said an additional 43 banks received final approval on Tuesday, but those names will not be released until Monday.

The Treasury also confirmed that it had given preliminary approval to American Express Co and CIT Group to receive support from the US$700 billion bailout fund.

The money is being disbursed as part of the government’s effort to buy stock in banks, to bolster their balance sheets and spur them to step up lending to fight the worst financial crisis to hit the country in seven decades.

But critics contend that many banks are not using the government funds for the purpose Congress intended.

An Associated Press survey of 21 banks that received at least US$1 billion each in government support found that none of them would provide specific answers on how the money was used.

Credit card giant American Express said it had received preliminary approval for US$3.39 billion in government money. And commercial finance company CIT Group said it had received approval to obtain US$2.33 billion.

The Treasury confirmed that both companies had received preliminary approval for government support. The final authorization comes after lawyers draw up the documents needed to transfer the funds. Under the rescue legislation passed in October, Treasury has two business days after the final documents are signed to announce the actual release of the money.

In the list of banks released on Tuesday were 14 banks that do not have publicly traded stock. They were the first institutions in this category of banks to win government funds.

House Financial Services Committee Chairman Barney Frank said on Monday he is preparing legislation to require that some of the bailout money be spent for specific purposes, such as stemming foreclosures and reducing mortgage rates. Frank is pushing to get the second half of the US$700 billion rescue fund released next month, before US president-elect Barack Obama is inaugurated.

Frank’s bill would impose tighter restrictions on the second US$350 billion, such as requiring banks to report on their new lending every quarter and toughening limits on executive compensation.

Frank said his legislation would also include a version of a plan, supported by Federal Deposit Insurance Corp Chairman Sheila Bair, to spend US$24 billion to give lenders financial incentives to modify more loans and help more borrowers keep their homes. Bair has estimated it could prevent 1.5 million foreclosures.

It was unclear whether Frank could gain enough support to win congressional approval to release the second US$350 billion before Obama takes office, given opposition among Republicans.

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