Bailed out firms are doling out dividends

WASHINGTON, Oct. 30 (UPI) -- A large share of the U.S. federal bailout funds allocated to banks will end up in the hands of the banks' shareholders, much to Sen. Charles Schumer's dismay.

"The whole purpose of the program is to increase lending and inject capital into Main Street. If the money is used for dividends, it defeats the purpose of the program," said Schumer, D-N.Y.

Schumer is requesting the government suspend dividend payments for banks that participate in the bailout plan, The Washington Post reported Thursday.

In the next three years, 52 percent of the bank's bailout allocations could wind up in the hands of shareholders, the Post said.

The Bank of New York Mellon was allocated $3 billion in bailout funds Tuesday and is scheduled to dole out dividends of $275 million this quarter, and could spend $3.3 billion on dividends in the next three years, the Post said.

Several bailout programs in Europe mandate a suspension of dividend payments for participating banks. The U.S. Treasury has said allowing banks to maintain dividend payments encouraged participation in the program.

"The terms ... were set to encourage participation by a broad array of financial institutions," Treasury spokeswoman Michele Davis told the Post.