Banking Law

Drive-by Blogging

 This has been a long, long day and there's a Shiner Bock with my name on it waiting in the icebox, so here are just a couple of "quick hits":

• I received an e-mail today from an attorney with a federal bank agency, who shall remain nameless to protect the guilty. His/her entire e-mail was the following sentence: "Perhaps the new initiative should be referred to as the 'Bad Asset Resolution Fund' or BARF for short." Not only hilarious, but soon to become a classic. Inasmuch as he/she must remain anonymous, I plan to shamelessly steal this acronym. Who said government lawyers don't have a sense of humor?

• Another e-mail I received today was from a partner in a large Midwestern law firm, who at one time toiled in the boiler room of a federal bank agency, and who pointed out that I failed to mention in my previous post one additional reason that community banks are shying away from the TARP CPP: they don't want another shareholder, and certainly not an activist shareholder. "Plenty of community banks think they have too many shareholders already - they don't want another, especially Uncle Sam." That's a good point. He also asked a related question: 

Were you surprised by the number of banks that opted out of the FDIC guarantee programs, especially the demand deposit program? They mostly seem to be either small rural banks (relatively small demand deposit accounts and/or little competition from bigger banks that didn't opt out?) or affiliates of securities companies (I assume with little or no demand accounts at all).

I can't say that I'd given it much thought until he raised the issue. Certainly, if a bank had a small number of demand deposits, then it didn't need to pay the costs associated with the FDIC's Temporary Liquidity Guarantee Program. Also, I think that the lack of participation may be in part related to my correspondent's observation about the CPP. Small town bankers have enough trouble coping with the camel named "Uncle Sammy" sticking his nose under their tent during exam time. They definitely don't want the camel ending up in their sleeping bag if they can avoid it. Therefore, if they don't absolutely need the help, they'll pass on it.

Full post as published by Bank Lawyers Blog on February 02, 2009 (boomark / email).