Another Bank Subsidy

The Treasury secretary, Timothy Geithner, today announced $5 billion in "New Markets Tax Credit" awards through the Treasury's Community Development Financial Institutions Fund. As is typical, for all the Obama administration's talk of transparency, the names of the actual grant recipients are buried within a PDF document, but one of the services provided here at FutureOfCapitalism.com is to read pdfs for you. Sure enough, Banc of America CDE, LLC gets $70 million to put into real estate, Chase New Markets Corporation gets $40 million to put into financing businesses, and Citibank NMTC Corporation gets $90 million to put into real estate. Given the billions that BofA, JP Morgan Chase, and Citi have already sopped up from TARP, from the FDIC's Temporary Liquidity Guarantee Program, and indirectly as counterparties to the bailed-out AIG, it's either stunning or predictable that they are back for more. It's certainly part of a pattern -- as we noted earlier, GM went back for a $2.6 million subsidy from the Energy Department after its $66 billion bailout. If these are worthwhile projects, the banks should be willing to back them without 40% tax credits. And if they aren't worthwhile projects, why do them at all? Another pattern: It's not just the Democrats or the Obama administration that is responsible. As the Community Development Financial Institutions Fund Web site notes, "The CDFI Fund was established by the Riegle Community Development and Regulatory Improvement Act of 1994, as a bipartisan initiative." Sure enough, that act passed the Senate on March 17, 1994 by unanimous consent, and passed the House on August 4, 1994 by a vote of 410 to 12. The "yea" votes included Newt Gingrich as well as then-Rep. Charles Schumer.