Miscellaneous TARP Stories

January 26, 2010

Authored by: Robert Klingler

We’ve identified a number of stories that or posts that never quite made it into individual BankBryanCave.com posts.  Rather than continuing to hold on to them, I’ve assembled them here.

The Simpsons

Vanity Fair

In October 2009, Vanity Fair published an expose on TARP titled Good Billions After Bad (as well as a humorous Annotated TARP Application).  Although the article has several “facts” that I would deem questionable, it’s worst offense clearly comes under the heading “Ask and You Shall Receive.”  Specifically, the article expresses the notion that no bank that asked for TARP funds was turned down.

One policy that TARP did decide to adopt was to keep confidential the name of any bank that was denied TARP funds—but it never had to invoke this rule. In those early months, with billions being wired all across the country, no financial institution that asked for TARP money was turned away(emphasis added)

While it may be technically true that no financial institution was formally denied, it is quite clear that many, many financial institutions were not approved.  This, along with the main stream media frequently ignoring the dividend and warrant costs associated with receiving a TARP investment, likely continue to feed the negative perceptions associated with the TARP program.

Portfolio

In April 2009, Portfolio published a piece titled Confessions of a TARP Wife, chronicling the sacrifices and thought processes from the perspective of a wife of the CEO of a TARP recipient.  While ridiculed by many, including New York magazine’s piece Unmasking the Anonymous TARP Wife, the anxiety of being associated with the TARP program seems largely consistent with the feedback that we hear from executives and directors of clients.

PBS Newshour

In November 2009, FDIC Chairman Sheila Bair was interviewed on the PBS Newshour and announced the bank bailouts were “not a good idea.”  While the conclusion certainly led to numerous headlines, the actual interview provides additional analysis as to why, with the benefit of hindsight, Ms. Bair may have pursued an alternative tact.

PAUL SOLMAN: In general, in hindsight, is there anything you would now have done differently?

SHEILA BAIR: Yes. I think we would have tried to dissuade Treasury from making these capital investments. I do. … [The] program was to be a troubled asset relief program. And as part of an international coordinated effort, a decision was made to instead use the money to make capital investments into these very large institutions.

But I just see all the problems it’s created now, the horrible public outcry. It’s had a terrible, terrible impact on public attitudes toward the financial systems, towards the regulatory community. It’s created all sorts of issues about government ownership of these institutions.

What happens if they get in trouble again? What kind of — you know, do we contain the bonuses and the compensation, because they’re taxpayer — partially taxpayer-owned, which might make things worse, because they can’t bring in new and better management, which, in some cases, might be necessary?

So, I think the complications from this — in — you know, in the urgency of the time, nobody should have — you know, be held account perhaps for not thinking all of this through, but, in retrospect, I think it was not a good idea.