US won’t ID banks rejected for aid

In a response to a public records request from The Boston Globe, the Treasury Department provided a list of all the banks that applied for money under the Troubled Asset Relief Program - but blacked out scores of names of banks that were rejected, withdrew their applications, or are still awaiting a decision.

The Treasury Department said it could withhold that information under an exemption in the federal Freedom of Information Act that protects “trade secrets and commercial or financial information obtained from a person that is privileged or confidential.’’ On Sept. 9, Duane D. Morse, chief risk and compliance officer of the Treasury’s Office of Financial Stability, upheld the department’s decision to withhold the information.

“Specifically, I find that release of such information would likely cause substantial competitive harm to the particular institutions in question as well as undermine the effectiveness’’ of the program, Morse wrote the Globe.

Citing a similar rationale, Treasury spokeswoman Meg Reilly said the agency couldn’t even disclose the total number of banks that were turned down or withdrew their applications for aid.

So far, 10 institutions in Massachusetts, including State Street Corp. in Boston and Rockland Trust parent Independent Bank Corp., collectively received more than $2 billion in aid. Three of those Bay State banks, including State Street and Independent, have since repaid the government.

The Treasury Department said the program was intended to inject up to $250 billion into healthy banks to stabilize the financial system and encourage institutions to increase lending. More than 600 banks have received aid nationwide under the program. The Treasury Department says the program is not a bailout, and is intended to eventually generate a profit “while strengthening the backbone of and providing confidence to our nation’s financial system.’’

The Office of the Special Inspector General for the Troubled Asset Relief Program declined to comment on the Treasury’s withholding of information.

Critics say the agency’s decision not to identify the banks it denied makes it difficult to discern whether the government gave aid to virtually every institution that applied or steered the money to a selected group. It’s also unclear how many banks withdrew their applications for aid because Congress and the White House imposed additional restrictions on companies that accepted the money. At least three banks in Massachusetts have said they decided against taking the aid after receiving preliminary approval.

“I don’t think anyone understands the rationale for how this has been handled - who has gotten the money and why,’’ said Leslie Paige, a spokeswoman for Citizens Against Government Waste, a Washington nonprofit that tracks public spending. “It feels like a Rubik’s cube.’’

And Charles Davis, executive director of the National Freedom of Information Coalition, called the Treasury Department’s decision “completely illogical.’’

Davis, who is based at the University of Missouri in Columbia, pointed out that the Treasury Department cited a rule “designed to protect proprietary information and formulas, such as the secret formula for Coke.’’ He called TARP program data “essentially public information . . . that the investment community has every right and the obligation to know.’’

In March, the Globe’s parent company, The New York Times Co., sued both the Federal Reserve and Treasury in US District Court in New York for refusing to release various documents related to the government’s bailout of the financial sector, including the list of companies turned down for TARP funds, after the agencies rejected several public information requests from the Times newspaper. That lawsuit is pending.

Separately, Judicial Watch, a government watchdog group based in Washington, D.C., sued the Treasury last month, seeking documents related to the government’s decision to pump funds into OneUnited Bank of Boston even though regulators cited the bank last year for operating with inadequate reserves.

In a statement, Judicial Watch complained that OneUnited “did not appear to be a suitable candidate for federal assistance until [Massachusetts congressman] Barney Frank intervened and shook loose a $12 million TARP grant.’’

Frank has acknowledged that he asked the Treasury to consider lending money to OneUnited, but said it was a legitimate effort to protect the only minority-owned bank in Massachusetts.

Todd Wallack can be reached at twallack@globe.com.