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Get ready for a bank PR blitz. Amidst consumer outcry to “show me the money” and U.S. Treasury’s demand for accountability, hundreds of banks participating in the $700 billion federal bank bailout soon will have to detail the use or expected use of the funding received through the Troubled Assets Relief Program (TARP) funds, and potentially the related Capital Purchase Program (CPP). 

Without getting too technical, TARP and CPP are U.S. government programs to purchase assets and equity from financial institutions in order to inject capital, thereby strengthening the financial sector and increasing the flow of financing to U.S. businesses and consumers.

While that all sounds good, the program is not without its critics. In its few short months of life late in 2008, as financial institutions started receiving funds – from as little as $1.1 million by private Independence Bank to as much as $45 billion by Bank of America – the TARP and CPP programs have since come under intense scrutiny and criticism for where the money is going and how it is being used.

That will soon change. In a January 22 letter to Charles Grassley, the ranking U.S. Senate member of the Committee on Finance, Special Inspector General Neil Barofsky, from the Office of the Special Inspector General Troubled Asset Relief Program, fired a proverbial “shot across the bank bow” by outlining steps for increased oversight to assess effectiveness and use of TARP funds.  (In his letter, Barofsky politely describes this undertaking as an “initiative,” although banks may see this as a dreaded “audit.”)

In a response posted the same day, Senator Grassley commented, “I encourage the Special Inspector General to be as aggressive as possible in achieving full disclosure of how TARP dollars have been spent and will be spent so that program assessments can be made and future actions are as effective as possible.”

This means financial institutions participating in TARP and potentially CPP (all told numbering some 340 banks), will have to get very specific about their expected use of TARP funds, provide supporting documentation, describe how they will be compliant with the program (including executive compensation), and certify the accuracy of such statements.

Banks execs, who already have been getting a public relations workout (or thrashing in some cases), now are bracing for a new round of getting very compliant, transparent and public.

Coming on the heels of “Hey, (insert name of bank) is safe and sound” messages that hit late last summer as the financial crisis worsened (and as 40 banks and credit unions failed), you now can expect to see a whole new level of PR “key messaging” around banks’ use of TARP and CPP funds.

Even though banks really won’t have a choice in this “show me the money” matter, such transparency will be a good thing, and my hunch is that banks will adopt one of three PR tracks in response:

1. On one extreme, some banks will play it safe by providing just the facts (and hope they won’t get noticed).

2. On the other side, some banks will gear up the PR machine to really “spin it” and may trumpet all the good things they are doing (and hope they get front-page, prime-time coverage).

3. Finally, some banks could effectively use this “initiative” as a way to tell real, honest stories about how the bailout money is being put to work to help real people and businesses deal with these tough economic times (and by doing so, will earn trust, respect and more business).

Bottom line? Bank execs have to face the fact that there’s no chance of putting a lid on use of the TARP program. Instead, it’s time to be very transparent, something that will be welcomed by all.