Commentary: How did troubled bank get TARP funds?

It is tempting to dismiss Friday's forced closure of United Commercial Bank of San Francisco as the isolated problem of one troubled institution. As The Bee's Andrew McIntosh reported in September, the Securities and Exchange Commission was investigating the bank after discovering it had hidden huge commercial real estate losses.

But United Commercial, whose 65 branches included two offices in the Sacramento area, wasn't just the victim of its own inept – and possibly corrupt – management. Its collapse came after it received $298.7 million in federal bailout money last year. And that raises questions on why it received those funds, and why the government failed to do a better job of overseeing it.

The Troubled Asset Relief Program, which pumped hundreds of millions into United Commercial, was not supposed to be a bank-preservation act. Although some giant banks justifiably got huge sums to prevent the financial system from melting down, the program's investment in smaller banks was specifically limited to institutions that were healthy but wanted extra capital for stability or to make loans.

United Commercial, for instance, was supposed to use its TARP money to boost its lending to small and medium-size businesses, and provide mortgage relief.

Why did TARP administrators fail to see the rot that would ultimately prevent United Commercial from meeting that obligation? Investigators are currently trying to figure that out. But one likely reason is TARP's lack of transparency.

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