WASHINGTON (AP) - The government said Tuesday it had provided $1.46 billion to 19 banks in the latest payments from its $700 billion financial rescue fund.
The Treasury Department said the new payments bring the total paid out in its program to buy banks' preferred stock to $198.5 billion.
The government is buying preferred shares of stock as a way to bolster banks' capital reserves in the hopes of encouraging them to resume more normal lending.
The largest payment in the latest round was $1.22 billion which went to Discover Financial Services of Riverwoods, Ill., and the smallest payment was $425,000 obtained by Haviland Bancshares Inc. of Haviland, Kan.
The latest payments were made last Friday. Under the legislation that created the $700 billion bailout fund last October, the Treasury Department has two business days to disclose that a payment from the fund has been made.
The target announced by the Bush administration was that $250 billion of the first $350 billion in bailout support would go to banks to purchase stock as a way of bolstering their capital reserves. Former Treasury Secretary Henry Paulson switched the emphasis of the program to buying bank stock after deciding that a program to purchase of toxic assets held by banks would take too long to implement giving the serious deterioration the financial system was undergoing last October.
The bailout effort also has supplied billions of dollars under other rescue programs, including one designed for large troubled banks that has provided aid to Citigroup Inc. and Bank of America Corp. Insurance giant American International Group Inc., as well as automakers General Motors Corp. and Chrysler LLC and their auto financing arms, also have received taxpayer support.
The administration is currently facing a firestorm of criticism after it was revealed that AIG paid out $165 million in bonuses in recent days to employees who worked for an AIG unit that sold credit default swaps, the risky contracts that caused massive losses for the company.
The Obama administration has promised to attach more strings to the assistance than the Bush administration did, but has not said how much of the second $250 billion in the fund will be used for bank stock purchases.
As part of the new administration's overhaul of the bailout effort, banking regulators are requiring 19 of the nation's largest banks to undergo stress tests to see whether they will need additional support to withstand a more severe downturn than the country is experiencing.
The new administration has also said that it will use part of the rescue fund to set up a private-public partnership to buy bad assets from banks and is expected to provide details on how that partnership will work in the coming two weeks.
The Obama administration raised the possibility when it released its first budget request to Congress last month that it could ask for up to another $750 billion in rescue support.