A few bad TARP bets

U.S. consumers surprised the experts in October by reaching into their wallets and spending $347.5 billion, up 1.4 percent from September.

Economists had predicted a more modest 0.9 percent upswing in spending in the month before shopping becomes increasingly earnest with the approach of Christmas.

Federal Reserve Chairman Ben Bernanke said Monday "strengthening consumer spending outside of autos" was one of the bright spots in a nascent recovery.

Consumers, however, may disappoint retailers this holiday season. A Gallup poll indicates consumers expect to spend an average $638 on gifts this year, almost as low as last year's $616 average and far below the $740 average a consumer poll indicated they would spend a month ago.

In Bernanke's speech at the New York Economic Club Monday, he added a critical sidebar, describing the commercial real estate market as a bubble ready to burst.

Bernanke said the economy would make modest gains through 2010, held back by weak recovery in the job market and sluggish lending. On top of that, "demand for commercial property has dropped as the economy has weakened, leading to significant declines in property values, increased vacancy rates, and falling rents," all of which undermine commercial loans.

Bank industry analysts have pointed out the commercial real estate market is giving the same headaches to regional banks that subprime mortgages gave to some of the nation's largest financial firms a year ago. Bernanke pointed out the discrepancy. "Pressures may be particularly acute at smaller regional and community banks" that traditionally loan to local businesses.

Meanwhile, media reports Monday and Tuesday pointed to mounting evidence the U.S. Treasury made at least a few bad bets with the $700 Troubled Asset Relief Program.

The United Commercial Bank of San Francisco was the first bank with TARP funding to fail, costing the taxpayers $299 million, The Washington Post reported Monday.

But an auditor's report said 46 other TARP recipients had missed a payment to the government by the end of September.

On Tuesday, the Wall Street Journal said the government had seized or threatened to seize 27 firms with TARP funding, including Pacific Coast National Bancorp in San Clemente, Calif., which received $4.1 million in TARP funds and City National Bancshares in Newark, N.J., which received $9.4 million.

These are not the billion-dollar bailouts. They are $10 million here, $200 million there. But auditors and politicians are now scrutinizing deals approved by the Treasury in the midst of the financial maelstrom a year ago.

In market movement Tuesday, the Nikkei 225 in Japan slid 0.63 percent, while the Shanghai composite index rose 0.24 percent. The Hang Seng in Hong Kong lost 0.13 percent. The Sensex index in India rose 0.11 percent, while the S&P/ASX in Australia fell 0.54 percent.

In midday trading in Europe, the FTSE 100 lost 0.34 percent, while the DAX 30 in Germany lost 0.3 percent. The CAC 40 in France lost 0.36 percent. The DJ Stoxx 50 lost 0.19 percent.