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.

The North Carolina Department of Commerce announced the full list of recipients for the state’s NSP grant program. In all, the state awarded $48.85 million to mitigate foreclosures in the state.  The funds come from HUD.  Nationally, approximately $4 billion was allocated to the program.

At a time when the Federal Reserve is printing one billion dollars every hour in new money, putting only $4 billion on foreclosures seems like a huge mis-allocation.  For North Carolina, with the nation’s tenth largest population, the funds will be useful but more certainly could have been utilized.  In fact, Commerce received more than $100 million in requests for its NSP funds.

Just think how much we could spend to repair our neighborhoods if we could get bonuses like those executives at AIG.  Even if we don’t know how to make a huge money losing bet on a credit default swap.

Wake County is the big winner.  It took home a bit more than 20 percent of all funds granted by the state.  Both the City and the County were awarded their own grants.  As well, Passage Home and St. Augustine’s College CDC (no web page) each received more than $2 million.  The two non-profits both plan to put the money into the Southeastern Raleigh area, a neighborhood that border’s on downtown Raleigh and its convention center.  It appears that the City also intends to put its funds in that area.  This would do a lot to shore up the capital, although the capital is hardly reeling.  In fact, a report out today shows that the Raleigh-Cary MSA is the leading city in the country for in-migration, sparked by the availability of good jobs in government and technology.

Some of the large metro areas were largely shunned. The City of Durham received $2.1 million.  Non-profits and the City had applied for approximately $5 million. At CRA-NC, our project was turned down.

Lexington and Gastonia and Henderson, all relatively small cities, each got $2 million.

For those who are shut out, some of the intermediary funding could still be a savior.  The North Carolina Community Development Inititiative got $3.5 million.  It will re-allocate a portion of those funds.  The North Carolina Housing Finance Agency got $4 million.  Self-Help Credit Union, one of the state’s most successful development agencies with operations in metro areas in most of the “greatest need” areas, only got $2.5 million.

Self-Help plans to use the money to create loan opportunities for families that want to buy these properties after they are redeveloped.  This is a different strategy, and one that should serve to enhance Self-Help’s balance sheet.  There loans will come with some guarantees, they will receive interest on their loans, and they will be collateralized.  Other recipients will spend their funds, Self-Help will add the money to its working assets.

The North Carolina Department of Commerce is about to send out annoucements regarding allocations of its NSP grants.

The NSP grants were allocated by a competitive bidding process.  Their intent is to mitigate the impacts of foreclosures.  Commerce announced earlier that it intended to focus the relief upon 23 urban counties.

The announcements should be posted here.

UPDATE: The City of Durham has been notified that it received $2.1 million.  Durham Habitat was turned down.

UPDATE: CRA-NC’s application, in coordination with CASA of Durham, was turned down.

Magic Johnson, pitchman for Jackson Hewitt, has his own tax agenda. It is one that probably wouldn’t square with his public persona as a person trying to bring capital into underserved communities.

Johnson is part of a small group lobbying on behalf of hedge funds for a special tax exemption.  Johnson is part of the Access to Capital Coalition. (wsj:subscription) That has a ring to it.  Most often, groups using that phrase are speaking on behalf of low-income and minority borrowers.  Not so with Johnson.  This coalition wants to make sure that there aren’t any taxes on carried interest. Currently, these groups pay a tax rate of 15 percent on their carried interest – below the effective corporate tax rate of most banks or other corporations.

Johnson’s is a partner in the Canyon Johnson Urban Fund.

His partnership with Jackson Hewitt helps to take capital out of low-income neighborhoods.  JH provides tax prep with high cost refund anticipation loans.  Most of the consumers of these loans are low-income filers getting the Earned Income Tax Credit.  The RAL speeds up their return, and it also means that filers do not have to pay income tax preparation fees out-of-pocket.  Jackson Hewitt is providing some help for Magic’s Foundation.  Check out how well Charity Navigator says his foundation runs.  Not that half of the money it collects goes to administrative fees!

Carried interest in the main means of income for general partners of hedge funds and private equity (more…)

People who work in the trenches on Community Reinvestment Act policy seem to have some pretty differening notions of how to modernize this bill.  They agree that something needs to be done.  It is just a question of how.

On the right, a lot of people have come out call the CRA a specious bill that provoke subprime lending.  They use it as a scapegoat for all of problems.  From people like Peter Wallison at the American Enterprise Institute, to commentators on Fox News, the right is pretty uniform in the opposition to the bill.  Here is Wallison in action, putting the fault both on CRA and on President Clinton at the same time.  Here is Wallison, focusing the blame of the financial crisis upon both CRA and the GSEs.

Generally, their solution is to tear down at the existing obligations spelled out in the Act.

Then there are an opposite set of voices, largely coming from academics and advocates who support the CRA and actually want it expanded in the wake of this crisis.  This group includes people on the left, and some moderate Republicans.  The latter have written some of the most influential papers cited by within this perspective.  Former Federal Reserve Governor Randall Kroszner tells people “not to blame” the CRA. His key statement, noticeably driven by data, is this:

Only 6% of all the higher-priced loans were extended by CRA-covered lenders to lower-income borrowers or neighborhoods in their CRA assessment areas, the local geographies that are the primary focus for CRA evaluation purposes.

He finds that independent mortgage companies are actually the main root of subprime lending.  This squares with what former OCC Comptroller Eugene Ludwig observed about Cleveland.  CRA made about 650 loans in Cleveland, but there are 15,000 foreclosures there right now.  And, he says, the leading lenders were Argent Mortgage (a non-CRA regulated subsidiary of Citi) and New Century (an independent mortgage firm).

In a court filing led by Cuyahoga County, it noted that Argent made 4,800 loans in Cuyahoga County for the three years ending in 2006.  Those loans accounted for 27 percent of all subprime loans (pdf). In 2006 and 2007, Argent and its corporate partner Ameriquest made 1,600 foreclosure starts.

Going forward, though, the public is likely to feel slightly different.  Few even know what the CRA is.  Fewer still would probably pick a bank, or avoid it, based upon their CRA score.

Consumers want to know that they have a good economy.  They want jobs.  They understand that the stock market is crashing and that it is undermining a lot of things beyond just the share prices of bank stocks.

In short, they want safety and soundness measures. That means that the pragmatic opportunity, for either side, will probably be the set of policy solutions that best grafts their interest (end the CRA, or grow the CRA) into the larger public concern for restoring order to our economy.