Treasury Provides $15 Billion in TARP Funds to Local Banks

The U.S. Treasury Department gave details on Monday of a $15 billion investment in seven banks made through its Capital Purchase Program.

Treasury created the Capital Purchase Program, a part of the Troubled Asset Relief Program (TARP), to help to stabilize and strengthen the U.S. financial system. Treasury allocated $250 billion under TARP's Capital Purchase Program to invest in U.S. financial institutions. Up to now Treasury has invested $187.5 billion into 215, banks getting preferred stock and warrants from participating institutions.

Citigroup got another $20 billion, bringing its government loan to $45 billion. Also on the receiving end: $2.3 billion to CIT Group, $1.4 billion to SunTrust Banks and $412 million more to three smaller local banks. PNC Financial Services Group, Inc. received the most on Monday with a $7.6 billion investment. PNC acquired struggling Cleveland, OH lender National City Corp. last year. Treasury announced PNC's preliminary approval for TARP on the same day that PNC said it was buying National City for $5.6 billion. Fifth Third Bancorp got $3.4 billion. Fifth Third bought failed Freedom Bank from the Federal Deposit Insurance Corp. for $36 million on November 1.

Treasury has invested amounts from as small as $1.5 million to as large as $25 billion, financing community banking and Community Development Financial Institutions in 41 states and Puerto Rico.

Wall Street Focuses on Economic Reports and Obama Tax Cuts

A slew of reports this week on home sales, manufacturing and more job cuts will be the second thing that investors will look at on Tuesday. On Monday President-elect Barack Obama's announcement of his proposal to give $300 billion in tax cuts adds to the optimism that investors hope will rescue the economy faster than most analysts are predicting.

On Monday more companies joined the litany of employers laying off workers. Among those announcing cuts: Cigna, a Philadelphia, PA-based health benefits company, will cut 1,100 jobs, or 4 percent of its workforce, to save $40 million. Logitech, a computer products maker in Fremont, CA also said it will cut 15 percent of its salaried workers. Toyota Motor Corp. will also idle production at its factories in Japan for 11 days in February and March due to a 37 percent drop in U.S. sales.

The Institute for Supply Management will issue its December report on the services sector on Tuesday. Economists predict the index will decline to 37 from November's 37.3. The government will also report on November factory orders and is expected to show decline of 2.6 percent, an improvement over the 5.1 percent drop seen in October.

Prosecutor Wants Madoff's Bail Revoked

A U.S. Attorney asked a judge on Monday to revoke Bernard Madoff's bail, charging that the hedge fund manager broke his promise not to touch his assets by mailing jewelry and other items estimated at $1 million to relatives and friends on December 24. Assistant U.S. Attorney Marc Litt told U.S. Magistrate Judge Ronald Ellis at a bail hearing that Madoff's actions were an obstruction of justice. Ellis has ordered both sides to give him written arguments this week, and he will make a ruling later.

Ira Sorkin, Madoff's lawyer, claims Madoff didn't violate a court-imposed asset freeze. Sorkin says Madoff immediately sought the return of the items sent after he was told he could not send them out.

Madoff, a former Nasdaq stock market chairman, was arrested Dec. 11 on securities fraud charges. It is alleged that he duped his hedge fund investors out of $50 billion in what is being called the biggest Ponzi scheme ever. Rene-Thierry Magon de la Villehuchet, an esteemed French financier committed suicide last month in his Manhattan, NY office after finding out that he had lost more than $1 billion of his clients' money to Madoff's alleged scheme.

Madoff has been confined to his Manhattan apartment under house arrest. He owns mansions and yachts in Palm Beach, FL, and Hampton, Long Island. In court, Litt explained that Madoff obstructed justice by attempting to dissipate assets. Litt says Madoff is a danger to the community because he was liquidating assets needed by his investors.

E*Trade Units Fined $1 Million for Inadequate AML Program

Citing E*Trade units failed to adequately monitor for suspicious trading activity the Financial Industry Regulatory Authority (FINRA) announced it has imposed a $1 million fine against E*Trade Securities, LLC and E*Trade Clearing, LLC. FINRA charges the firms "failed to establish and implement anti-money laundering (AML) policies and procedures that could reasonably be expected to detect and cause the reporting of suspicious securities transactions."

FINRA's enforcement head says that brokerage firms' AML programs must be tailored to their business models. In the case of E*Trade, says Susan Merrill, Executive Vice President and Chief of Enforcement for FINRA, it gives its customers on-line, self-directed electronic access to the securities markets, and its AML program lacked automated electronic systems specifically designed to detect potentially manipulative trading activity in customer accounts.

FINRA, a non-governmental regulator, requires brokerage firms to establish and implement AML procedures that address a number of areas, including monitoring the trading in customer accounts as well as the flow of money into and out of these accounts.

FINRA says that between Jan.1, 2003 and May 31, 2007, E*Trade didn't have an adequate AML program based upon its business model. E*Trade was found not to have separate and distinct monitoring procedures for suspicious trading activity in the absence of money movement, and its AML policies and procedures could not reasonably be expected to detect and cause the reporting of suspicious securities transactions. FINRA says the firm relied on its analysts and other employees to manually monitor for and detect suspicious trading activity without providing them with sufficient automated tools. FINRA determined that this approach to suspicious activity detection was unreasonable given E*Trade's business model. E*Trade has neither admitted nor denied the charges and has consented to FINRA's findings to conclude the settlement.

Securities firms are required to monitor trading in customers' accounts for certain types of suspicious trading activity and file with Department of Treasury's Financial Crimes Enforcement Network (FinCEN) a report of any suspicious transaction relevant to a possible violation of law or regulation.

About the Author

Linda McGlasson

Linda McGlasson

Managing Editor

Linda McGlasson is a seasoned writer and editor with 20 years of experience in writing for corporations, business publications and newspapers. She has worked in the Financial Services industry for more than 12 years. Most recently Linda headed information security awareness and training and the Computer Incident Response Team for Securities Industry Automation Corporation (SIAC), a subsidiary of the NYSE Group (NYX). As part of her role she developed infosec policy, developed new awareness testing and led the company's incident response team. In the last two years she's been involved with the Financial Services Information Sharing Analysis Center (FS-ISAC), editing its quarterly member newsletter and identifying speakers for member meetings.

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