TARP Fraud
The Emergency Economic Stabilization Act of 2008 authorized the creation of the Troubled Asset Relief Program (“TARP), which quickly evolved into 12 separate programs involving government and private funds of up to almost $3 trillion. The TARP program is unique in its existence, size and purpose, with its beneficiaries coming to include hundreds of banks and other financial institutions, automakers, insurance companies and other large companies. With such a diverse array of recipients, the specific fraudulent schemes that will unfold are anyone’s guess, but the existence of fraud seems a virtual certainty.
In fact, initial fraud investigations are already occuring related to TARP funds, with some beginning as soon as a few months after the allocation of funds. With unclear goals and requirements, and an evolving oversight effort, the risk for substantial fraud, abuse and waste of these funds is obvious. The False Claims Act can be used for the purpose of recovering any fraudulently obtained TARP funds, or monies that once obtained are not used as originally contemplated by the various programs.
The various programs that comprise TARP are:
- Capital Purchase Program, which has made investments in more than 600 banks and financial institutions.
- Automotive Industry Financing Program, through which GM, Chrysler, GMAC and Chrysler Financial have received approximately $80 billion.
- Auto Supplier Support Program, which provides government-backed protection for auto parts suppliers.
- Auto Warranty Commitment Program, which provides government-backed protection for warranties of cars sold during the GM and Chrysler bankruptcy restructuring periods.
- Unlocking Credit for Small Businesses, through which the government has purchased securities backed by SBA loans.
- Systematically Significant Failing Institutions, through which the government has invested $69.8 billion solely in AIG.
- Targeted Investment Program, consisting of $40 billion of funding to Citigroup and Bank of America.
- Asset Guarantee Program, also providing support to Citigroup.
- Term Asset-Backed Securities Loan Facility (“TALF”), through which the Federal Reserve Bank of New York has offered non-recourse loans for purchase of asset-backed securities.
- Making Home Affordable Program, which is to provide up to $75 billion for the modification of consumer mortgages.
- Public-Private Investment Program, which is an expansion of TALF, for the purpose of buying other toxic legacy assets from various institutions.
- Capital Assistance Program, which provides capital to qualified financial institutions.
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