A professor of finance who has specialized in studying the Troubled Asset Relief Program has alleged political influence played a role in deciding which credit unions received funds under a U.S. Treasury Department program.
Linus Wilson, an associate professor of finance at the University of Louisiana at Lafayette, has authored 14 papers on different aspects of TARP and testified before Congress on TARP oversight.
His paper, Political Influence and TARP Investments in Credit Unions, charged that credit unions eligible for TARP funds under Treasury's Community Development Capital Initiative program were three times more likely to receive funds if they were located in a district represented by a member of the House Committee on Financial Services.
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The statistical analysis also showed, Wilson said, that "credit unions that received bailout money had significantly lower ratios of loans to deposits," adding "this means that TARP recipients lent less to their communities as a percent of deposits, relative to eligible credit unions that did not receive TARP investments."
Wilson called this "startling" because credit unions had been picked, in part, on their ability and willingness to lend money into their communities.
"Forty-eight credit unions received capital injections as part of the financial sector bailout. The predicted probability of receiving bailout funds jumps from 23% to 76% for the typical credit union, if the institution's headquarters was in the district of a member of the U.S. House Financial Services Committee," Wilson wrote.
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