Bailed out US banks facing probe: reportApril 13th, 2009 - 6:53 pm ICT by IANS
By Arun Kumar
Washington, April 13 (IANS) Bailed out US banks including Citibank, headed by Indian American chief executive Vikram Pandit, are facing a probe over increase in rates and fees, a media report said Monday.
The Congressional Oversight Panel, the body named by the Congress to oversee the federal bailout under the Troubled Asset Relief Programme (TARP), is working on a report examining instances of potentially inappropriate lending by banks that got government capital, according to the Wall Street Journal.
“The people who are subsidising the activities of the banks through their tax dollars are the same people who are furnishing the high profits through consumer lending,” Elizabeth Warren, chairwoman of the Congressional Oversight Panel told the Journal in an interview.
“In a sense, we’re asking taxpayers to pay twice,” Warren told the leading financial daily.
The US Treasury Department’s $700 billion TARP was intended to provide lenders with more capital to spur lending and improve the economy.
Since TARP was launched in October, banks bolstered by capital infusions have boosted charges on a wide range of routine transactions, hiked rates on credit cards and continued making loans criticised as predatory by consumer advocates, the paper said.
For example, Citigroup Inc. is trying to entice customers to borrow at high rates, the Journal said. “You could get $5,000 today,” Citigroup’s consumer-finance unit wrote in fliers mailed to customers. The ads don’t disclose that the loans often carry annual interest rates of 30 percent.
The interest rates “compare competitively to similar offers in the market” and vary depending on the creditworthiness of borrowers, a Citigroup spokesman said.
Citigroup has received $50 billion in capital from the US government which will soon own as much as 36 percent of the company’s common stock.
Bank of America Corp, another recipient of government cash, last week told some customers that interest rates on their credit cards will nearly double to about 14 percent.
“To continue to offer competitive products and services and responsibly lend in this current environment, we must adjust our pricing,” a Bank of America spokesperson was quoted as saying about the company’s new fees and interest rates.
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Tags: arun kumar, bank of america, bank of america corp, capital infusions, citigroup inc, congressional oversight, consumer advocates, consumer finance, elizabeth warren, finance unit, government capital, government cash, oversight panel, routine transactions, s 700, stock bank, treasury department, us treasury department, vikram pandit, wall street journal