TARP Money: Scratch-Off Sweepstakes at Fifth Third

Fifth Third Bank, a recipient of TARP funds, has been giving away money through scratch-off cards.  The contest, is open to anyone in the bank’s footprint.  It was announced in September and ran through Nov. 24, 2008.  It was called the “Unlock Your Dreams” contest.

Prizes include a $250,000 award, as well as a bunch of smaller instant offers.

The prize awards were given out after Fifth Third received $3.4 billion through TARP.

The bank’s share price has dropped dramatically in the last year.  Today, shares are trading for $2, whereas last year at this time they went for $23.68.  Recent reports suggest that Moody’s may downgrade their debt by two notches.  Its long-term debt is currently rated A2.

Fifth Third also spends money on naming rights for Dayton’s Fifth Third Field, home of the Dayton Dragons. They also have purchased the naming rights to Fifth Third Field, home of the Toledo Mud Hens.  And, they put money toward the naming rights for Fifth Third Arena, home of the University of Cincinnati Bearcast basketball team.

Republican Congressman Steve LaTourette (R-Oh) has voiced his concerns about the sweepstakes.

Who’s to blame here?  Well, it seems like Fifth Third may suffer some of the impact if there is ongoing outrage about this issue.  It’s not likely to be an AIG type of response, nevertheless.  More like a minor tremor.

Still, part of the problem goes back to lack of oversight given to the disbursement of TARP funds.  The frivolous use of funds is hardly limited to 5/3.  Citigroup is still putting its huge contract into naming rights for the new stadium that will house the Mets.  These are symbolic problems.  It is easy to say that they are only minor issues, but the public understands less about the details of TARP or TALF compared to the obvious political implications conveyed by these kinds of issues.

Then there are the non-symbolic problems.  Sometimes, TARP money is going for activities that are entirely non-productive.  Some are actually acting to counter other government policies.  There are firms using TARP money who also rely on refund anticipation loans for most of their income. Those RALs are largely paid for against expected returns on Earned Income Tax Credits.  That is the federal government’s biggest instrument to thwart poverty.  Oh, and the RALs create excellent avenues for fraud.  Look at the losses experienced by Pacific Capital Bancorp (PCBC) related to fraud on its RAL business.

Someone at Treasury should have expected this and made some kind of pre-emptive clause in TARP funding to prevent this problem.

~ by samsondoggie on March 20, 2009.