Banking Law

The successor to "Bush Derangement Syndrome" among the chattering and political classes might soon be "TARP Derangement Syndrome." With the House and the Senate rushing through punitive legislation to punish bonus recipients at AIG, and in the process scooping up a number of other executives and employees of financial institutions other than AIG that took TARP CPP dollars and other forms of federal government aid, the public hysteria to trace TARP dollars through the golden goose's gullet is rapidly approaching ludicrous proportions.

The latest example is the dust-up caused by the Cleveland Plain Dealer breathtakingly breaking the news today that giant Ohio-based thrift Fifth Third Bank, a CPP recipient, had...gasp...conducted a marketing campaign that included a sweepstakes program that distributed $900,000 in prizes. TARP dollars to ordinary citizens in the form of a sweepstakess! Outrageous!

Or so intimates the main steam media, at any rate.

The sweepstakes idea was concocted a year ago, and the contest began before the TARP program was even announced. As Joe Champline, Fifth Third's Vice President of marketing correctly noted, "Once you start a sweepstakes, you must continue it and declare winners."

Not that compliance the legally binding obligations is of concern to members of Congress. Yesterday on NBC's Today show, I heard New York Democratic Rep. Carolyn Maloney being badgered by substitute host David Gregory about the fact that AIG was bound by legally enforceable contracts to pay the bonuses, after Rep. Maloney had asserted to Gregory that AIG's management should not have paid the bonuses. Rep. Maloney, apparently ignorant of the 5th and 14th Amendments to the US Constitution, as well as the difference between government and private parties, and caring not a fig for the concept of "a deal's a deal," said that the government abrogated contracts all the time ("renegotiated" might have been the word that she used), and she gave bankruptcy court as an example. The utter idiocy of that argument as applied to a private party like AIG, as well as her lack of understanding that even the US government can't abrogate private contract rights without due process of law, demonstrates that "Peter Principle" Maloney has reached her highest level of incompetence as a member of the House Financial Services Committee.

In the case of Fifth Third, we had Ohio Republican House member Steve LaTourette, a TARP hater from the get-go, jumping in front of the microphones to bloviate about the matter.

"This sweepstakes might not use a dime of bailout money, and might be a legitimate and successful marketing tool for the bank, but something that passed the smell test prior to the bailout might not afterward..."These institutions should walk on eggshells and really gauge what public reaction to their choices might be, because it's not good enough in this climate to say, 'I promise we didn't use taxpayer money.' "

How would a denizen of one of the rankest environs on the planet, the US Congress, be qualified to judge a "smell test"? I would have thought his entire world would smell like sulfur 24/7/365.

What is "good enough" for guys like LaTourette and the people he represents? What's next for banks that accept TARP or other government aid? Do marketing geniuses like Maloney and LaTourette get to micromanage what is and is not an appropriate marketing expenditure? Is any marketing expenditure appropriate? Better yet, if it's "public outrage" that drives what is and is not appropriate, just put all bank marketing budgets up for a public vote. That's the only truly safe way not to have "public outrage" fuel a public brawl in the public media.

I'm all for having Congress call for the average citizens who won money in that sweepstakes up to Capitol Hill to be grilled by the mouth-breathers there about how the winners spent the money they won in the "scratch off," and/or why they think that they're entitled to keep the dough. Better still, let's pass special legislation that those "winners" who don't return the money to Fifth Third pay a 90% excise tax on the winnings.

How low can we go?