Report: Officials fibbed on banks' health

The US Treasury building in Washington, D.C.

TEXT OF STORY

Bill Radke: In the rush to stabilize the financial system last fall, officials from the Treasury and the Fed reportedly misled the public about the health of some of the nation's biggest banks. That's according to an audit released this morning by the watchdog overseeing the bank bailout program.

Marketplace's Tamara Keith has more.


Tamara Keith: The first infusion of cash from the Troubled Asset Relief Program went to nine banks. At the time government officials described them as healthy. But at least in the case of Merrill Lynch, Bank of America and Citibank that wasn't actually true. The audit says, behind the scenes, officials including then-Treasury Secretary Paulson expressed concerns about the health of the banks.

In the audit report, the special inspector general says calling the banks healthy created unrealistic expectations and hurt the credibility of the program. Assistant Treasury Secretary Herb Allison says we can't forget that when this happened last year the whole financial system was on the brink of a meltdown.

Herb Allison: I don't think it's fair to second guess statements from the vantage point of today that were made a year ago at the height of the crisis.

That said, he agrees with the special inspector general's conclusion that accuracy and transparency are important in programs like this one.

In Washington, I'm Tamara Keith for Marketplace.

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