The use of bailout funds for acquisition

The U.S. Department of Treasury has issued $87.6 million to Dallas-based PlainsCapital bank from its $ 700 billion rescue program known as TARP. The receiver said they intentions to use the money for good purposes such as to increase the funds for business loans, students and mortgages. And the use of the funds does not exclude acquisitions.

However, the congress and taxpayer groups have opposed the use of TARP funds for acquisitions and do not feel good about the lack of new loans. Moreover, the government does not control and monitor how the banks will use the fund after they receive it.

Treasury argues that bank lending has not returned to normal because of the confidence from all parties are still weak. Banks remain cautious about extending credit, and consumers and businesses remain cautious about taking up new loans. It is also necessary for the banks to increase funds, which are the loans’ main source.