Banking Law

While I'm not a big fan of all of the year-end roundups that have been saturating the main stream media lately, I did get a kick out of a recent opinion piece in the Houston Business Journal, entitled "Roll up the TARP to ring in the new." Obviously, the Journal thinks that somebody needs to stab TARP in the face with a rusty nail file and let it bleed out. It's not that the editorial writer thought that TARP was such a bad idea, or that taxpayers aren't getting a decent return on the TARP money that banks have paid back ($62 for every US citizen "and apparently fresh pocket money for the Obama administration"). Instead, he or she thinks that TARP is a classic case of an originally clean concept sullied through the gentle ministrations of Uncle Samuel.

The TARP money, ironically, morphed into its own special kind of toxic asset. The Obama administration poisoned TARP by making the episode a profoundly unpleasant political experience.

At the end of the day in 2009, the public roller-coaster ride in the TARP arena shapes up as a classic example of the standard good news/bad news scenario.

The good news: A highly controversial policy of government intervention during a dire stretch in the economic life of the nation appears to have worked well.

The bad news: The government set a template of political overreaching and posturing likely to scare off financial institutions from participating in government partnerships in the future.

That "bad news" view got support from another quarter recently. According to an article in yesterday's Housing Wire, most banks think that TARP did absolutely nothing to help them.

...[A] bank survey completed by the Bank Administration Institute (BAI) claims only 12% of respondents feel the program positively impacted their operations.

The BAI & Finacle Bank Executive Index tracked the opinion of banking executives from the top 100 financial institutions in the United States. The executives, who staff commercial and savings banks, as well as credit unions, filled out an online survey regarding questions on the overall health of the economy as well as factors that improve customer satisfaction.

All-in-all, TARP appears to be regarded by many of those involved in the banking industry as a program that helped avert a disaster, but that could have done so much more for financial institutions if only the government hadn't screwed it up, which the federal government has a god-given talent for doing. As for us, we think that any time a massive government program is created and doesn't bring forth plagues of locusts or the overnight deaths of every first born male infant in every household in the country, that's a definite success.