Small Banks May Need More TARP Funds

According to the Congressional Oversight Panel in its monthly report, the TARP fund may need to infuse more capital into regional and other smaller banks in order to deal with troubled loans. The panel recommends that anywhere from $12 billion to $14 billion be siphoned off into smaller banks.

The committee was formed to oversee the Troubled Asset Relief Program, monitoring any changes that lawmakers may need to authorize in order to improve the program. So far, the COP has found that bigger banks have been able to cope well with troubled loans, recommending that the government instead focus on banks with assets ranging between $600 million and $100 billion.

The loan analysis in the report showed that many small banks would find their earnings overshadowing their projected revenue and reserves, leading to a desperate situation for many local banks. The COP had called for many more stress tests for smaller banks that would allow them to foresee a situation such as this one, which may have helped to avoid the situation reaching this level of urgency.

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