Tag: GMAC Financial Services

The news that CIT Group Inc. and American Express were approved this week for $5.7 billion in bailout funds after becoming “bank holding companies” strikes us as a particular sort of American ingenuity.

After all, who wouldn’t call themselves a ‘bank holding company,’ if that qualified them for billions of dollars in taxpayer money?

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The independent watchdog group, Project on Government Oversight (POGO), sent a letter to Congressional leaders last week identifying eight companies that have sought funds from the Troubled Asset Relief Program by purchasing banks, or else getting approved as “bank holding companies,” to which bailout money is restricted.

POGO suggested the companies “are trying to morph into different animals” to get a piece of the federal pie. A Dutch insurance company called Aegon is even attempting to purchase a bank in Maryland in order to get at TARP funds.

And who could blame them, really, when the list of companies applying for TARP funds grows longer each day?

POGO’s list includes:

• Lincoln National Corporation, which is in the process of acquiring Newton County Loan and Savings, an Indiana bank.
• Hartford Financial, which is acquiring Federal Trust Corporation, the parent company of Federal Trust Bank in Florida.
• Genworth Financial, which is purchasing InterBank FSB in Minnesota.
• CIT Group, which has converted its Utah Industrial Bank to a Utah State Bank.
• Morgan Stanley, which was approved as a bank holding company on Sept. 21.
• GMAC Financial Services, which opened GMAC Bank, a Utah-chartered bank, and was approved as a bank holding company on Christmas Eve.
• American Express, the nation’s fourth-largest credit card company, which was approved as a bank holding company on Nov. 10. The company owns American Express
  Centurion Bank, an industrial loan bank, and American Express Bank FSB, a federal savings bank in Utah.
• Goldman Sachs Group, which was approved as a bank holding company in mid-September and opened Goldman Sachs Bank USA in Salt Lake City.

Lincoln, Genworth, and Hartford are attempting to become Federal savings and loan holders through the Office of Thrift Supervision.

The others have added bank holding company to their list of services by opening branches in Utah and receiving approval from the Federal Reserve Board of Governors.

Yet POGO states that four of the companies claimed to be in good financial shape just weeks before applying for bailout money. The letter quotes American Express CEO Kenneth Chenault, for instance, asserting the company’s “business model is well positioned to generate earnings and excess capital, even in an economic environment that is likely to be among the weakest in many years.”

Of course, American Express has had to contend with higher credit costs and mounting losses as a result of the economic meltdown too. But when questioned about their interest in the bailout funds, neither American Express, nor CIT Group would explain how they intended to use it.

“The Fed has yet to meet a bailout it does not like,” Sean Egan, managing director at Egan-Jones Ratings Co., an independent credit-rating firm, told the Wall Street Journal.

Doesn’t exactly inspire trust that these companies will use the money to advance the goals set out by Congress to unfreeze the credit markets and strengthen the financial system.

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