TARP money can't be returned - Big Big Forums

anothersta · 04-05-2009, 04:32 AM

NEW YORK (CNN) -- There's a growing sense among some bankers that Troubled Asset Relief Program known as "TARP" has become toxic. As a result, they want to bail out of the bank bailout program.

"It should be called 'TRAP,' not TARP," said Brian Garrett, chief executive of Bank of the Bay in San Francisco, who is trying to return bailout funding. "Giving it back is harder than getting it."

0:00 /1:43Take back the TARP money
Garrett and other bank executives complain the Treasury's program to stabilize banks during these turbulent times is actually weighing down their potential for growth.

They're especially concerned the limits on executive compensation - imposed in February, four months after Treasury starting sending out checks - could make it difficult to hold on to star talent who may jump to financial institutions that are not receiving any Government assistance.

That concern is now magnified after the public whipping insurance giant AIG received for granting executive bonuses. No one wants to be the next AIG (AIG, Fortune 500).

"Things have changed since TARP was announced. The rules have changed," said Michael McMullan, CEO of the Bank of Florida, who withdrew his application for TARP funds Thursday. "We're going to need to attract and retain key revenue drivers and great bankers."

"The more restrictions that we are placed under from the Government, the less value we can deliver to our shareholders in the long run," said McMullan.

Iberiabank in Louisiana, California's Bank of Marin, and TCF Financial in Minnesota confirm to CNN Money that they are asking Treasury to take back their TARP funds.

"What these bank managers are saying is - listen, I want the Government out of my backyard, and I just want to give back the TARP, and I want to run my company by myself," said Paul Miller, Financial Services Analyst at FBR Capital.

Goldman Sachs (GS, Fortune 500), Bank of New York/Mellon (BK, Fortune 500), Wells Fargo (WFC, Fortune 500), JP Morgan Chase (JPM, Fortune 500) and Bank of America (BAC, Fortune 500) - all 'mega-banks' that the government forced to take bailout money - say they want to return taxpayer funds "as soon as practical."

But, they're well aware no one will be permitted to return funds before completion of regulatory "stress-tests" of the major banks to determine how they would withstand a severe recession.

"We want to return the TARP money as soon as possible. We feel more bullish about economic prospects broadly, but we recognize we can't repay the money without the approval of the regulators," said Goldman Sachs spokesman Lucas Van Praag.

The "stress-tests" are supposed to be finished next month. But it's likely the Treasury will not permit bankers to return taxpayer money for many more months.

The main purpose of TARP is to stabilize the banking system, to prevent a run on any bank that appears to be in trouble. It has done that much.

If Treasury starts taking money back from healthy banks while the economy is still in trouble the weaker banks may appear to be even weaker and the confidence that TARP brought may suddenly disappear.

"The Government has to maintain confidence throughout the banking sector. These banks are all interconnected," said Miller.

Bankers may not like the Government interfering in their business. But, right now, those who have taken TARP funds have little choice.

http://money.cnn.com/2009/03/27/news...back/index.htm

gmyers · 04-05-2009, 05:07 AM

I figured some would want to give it back so they don't have to have government telling them how to run their businesses.

Jolie Rouge · 09-29-2009, 02:13 PM

FDIC says bank failures to cost around $100B
Marcy Gordon, Ap Business Writer
34 mins ago

WASHINGTON – Federal regulators expect bank failures to cost the deposit insurance fund about $100 billion in the next four years and the fund to be running at a deficit Wednesday.

That is higher than an earlier estimate of $70 billion in failure costs through 2013.

The Federal Deposit Insurance Corp. made the projections Tuesday as its board voted to propose requiring banks to prepay an estimated $45 billion in regular insurance premiums for 2010-2012. The proposal could take effect after a 30-day public comment period.

The FDIC is fully backed by the government, which means depositors' money is guaranteed up to $250,000 per account. But it was the first time the agency has required prepaid insurance fees.

"I do think this is a good balance," FDIC Chairman Sheila Bair said. The plan requires the banking industry "to step up" while spreading the financial hit to banks over a number of years, she said.

An insurance payment by the industry of $45 billion "is not going to constrain lending," she said.

The insurance fund has been sapped by billions from a rash of bank failures that began in mid-2008. The banking industry prefers the prepaid premiums over a special emergency fee — which would be the second this year.

Without additional special fees or increases in regular premiums, the insurance fund — at $10.4 billion at the end of June — will become "significantly negative" next year and could remain in deficit until 2013, the FDIC is now projecting.

Ninety-five banks have failed so far this year as losses have mounted on commercial real estate and other soured loans amid the most severe financial climate in decades. That has cost the fund about $25 billion, the FDIC said Tuesday. The $10.4 billion already was the fund's lowest point since 1992, at the height of the savings-and-loan crisis. That is equivalent to 0.22 percent of insured deposits, below a congressionally mandated minimum of 1.15 percent.

Most of the $100 billion in costs are expected to come from failures this year and next, the agency said.

Bair didn't rule out the possibility of the FDIC tapping its $500 billion credit line with the Treasury Department, if the economy unexpectedly worsened. "But today is not that day," she said before the vote.

Some analysts expect hundreds more banks to fail in the coming years. But the FDIC is fully backed by the government, which means depositors' money is guaranteed up to $250,000 per account.

The deficit partly reflects higher reserves the FDIC has set aside for anticipated bank failures. At the same time, the balance of cash and assets of failed banks that can be sold by the FDIC remain positive, the agency said.

An emergency insurance fee on banks, which took effect June 30, brought in around $5.6 billion. Another one would allow the healthiest banks to keep more capital for investment, but could drive weaker banks toward failure, further depleting the insurance fund.

"The prepaid assessments represent money that the FDIC expects to receive from banks anyway over the next several years, but having the cash on hand sooner ... provides more flexibility for dealing with any contingencies over the foreseeable future," James Chessen, chief economist of the American Bankers Association, said in a statement. "Another special assessment would likely do more harm than good as it would directly reduce bank income, hinder capital growth, and make lending much more difficult."

In addition to the insurance fund, the FDIC has about $21 billion in cash available in reserve to cover losses at failed banks, down from $25 billion at the end of the first quarter.

"There's lots of liquidity; there's lots of cash. Liquidity's not an issue for the banking system right now," Bair told reporters.

http://news.yahoo.com/s/ap/20090929/...shrinking_fund