Banking Law

Texas Tarp Ad War Takes Its Toll

Last week, we discussed a nasty little public advertising campaign being waged by a couple of Texas banks that didn't take TARP CPP money against those who did. At the time, I thought that while most customers wouldn't be influenced to switch banks by that particular pitch, and while I'd never advise a bank to use it, I understood why and how it might appeal to the general public's ire over bank bailouts. Since that time, I've had second thoughts.

Today's American Banker (paid subscription required) ran a front page article that discusses the hard feelings that this marketing battle has generated, especially on the part of the CEO of a bank that's been on the receiving end of the ad campaign.

...Alan B. White, the chief executive officer of PlainsCapital, which has 11 branches in the Fort Worth area, called the executives behind the ads "irresponsible bankers." He said the moves contribute to "the media frenzy" surrounding companies that sold shares to the government under the Treasury's Capital Purchase Program.

One TV reporter showed up on his doorstep before 8 a.m. one day last week, he said.

Personally, I wouldn't care what time of day a TV reporter showed up unannounced on my front doorstep to harass my family over something that had to do with my business life. I'd fill J. Fred Muggs up with caffeine, open the front door, stuff a banana ot two down the reporter's pants, turn Muggs loose, and, you know, see what happens.

Mr. White obviously would like to do something similar to his competitors, although he claims that, so far, he hasn't lost any business over the ads (although he may have lost some sleep over them).

Mr. White said that the ads have not hurt PlainsCapital's business but that he is worried about the damage being done to the reputation of banks that took government money.

"I'm angry about the way we're being depicted in this country ? we're being thrown under the bus."

Some so-called "Dallas banking lawyer," quoted in the story, bloviated along the same line.

Kevin Funnell, a Dallas banking lawyer who posts the Bank Lawyer's Blog, said in the long run companies like First Financial and Worthington may be harming themselves, not just banks that received government funds.

"Banks tapping into the public anger over the current situation is a dangerous game," Mr. Funnell said in an interview. "It worsens the public perception of the industry as a whole, for their own short-term advantage."

When I ask non-bankers what they think about this topic, the most common response I receive (editing out the profanity) is, "A pox on both their houses." It's as if, after all the news over the past four or five months about bailing out "banks," (and Joe Six Pack doesn't distinguish between investment "banks" and commercial "banks"), "The Peeps" would just as soon take a flamethrower to entire industry and start from scratch. Of course, they'd like to do that to Congress, as well.

A couple of additional points to keep in mind. As Mr. White correctly points out, the government came to banks and asked them to participate in this program. Participation in the program by healthy banks is looked upon favorably by the federal regulators. If you don't want to participate in the program, I doubt that the regulators will hold that against you, as long as you remain healthy. However, I think that federal regulators will not look favorably on advertising campaigns that bash the banks that did what the federal government wanted them to do: take capital through the TARP CPP program. I might be completely wrong about that thought, but why run the risk that I'm right?

In addition, if the economy doesn't rebound, if the "recession" we're now in gets a lot worse, if private investors sit on the sidelines and refuse to inject capital into the system, those who today disdain TARP might find themselves thinking it doesn't look so ugly. Good luck, if it ever comes to that, because guys like Alan White (and the banking regulators) are likely to have long memories. In other words, I sure hope that the banks that are bashing their brothers over taking TARP money make a boatload of bucks out of that marketing strategy, because sooner or later, what goes around, comes around, and the reward better justify the risk.

Full post as published by Bank Lawyers Blog on February 18, 2009 (boomark / email).