Academic

Outsource: Can Geithner Say No To Banks Who Want to Pay Back TARP?

By Gordon Smith, Christine, Hurt, Vic Fleischer, Fred Tung, Lisa Fairfax, David Zaring

Can Geithner tell the big banks who want to pay back their TARP funds that they can't?  Clusterstock has a nice legal analysis here.  If you have to consult with a banking regulator before you can pay back your loans, the banking regulatory can say no.  And OCC, a division of Treasury, is one of the banking regulators who has consultation rights.  But the Fed regulates big banks and let's outsource the rest to John Carney:

Here's the appropriate passage of the FDIA (via DealBreaker):

(q) APPROPRIATE FEDERAL BANKING AGENCY.--The term "appropriate Federal banking agency" means-- (1) the Comptroller of the Currency, in the case of any national banking association, or any Federal branch or agency of a foreign bank; (2) the Board of Governors of the Federal Reserve System, in the case of-- (A) any State member insured bank, {{2-29-08 p.1071}} (B) any branch or agency of a foreign bank with respect to any provision of the Federal Reserve Act which is made applicable under the International Banking Act of 1978, (C) any foreign bank which does not operate an insured branch, (D) any agency or commercial lending company other than a Federal agency, (E) supervisory or regulatory proceedings arising from the authority given to the Board of Governors under section 7(c)(1) of the International Banking Act of 1978, including such proceedings under the Financial Institutions Supervisory Act of 1966, and (F) any bank holding company and any subsidiary of a bank holding company (other than a bank); (3) the Federal Deposit Insurance Corporation in the case of a State nonmember insured bank, or a foreign bank having an insured branch; and (4) the Director of the Office of Thrift Supervision in the case of any savings association or any savings and loan holding company. Under the rule set forth in this subsection, more than one agency may be an appropriate Federal banking agency with respect to any given institution.

It's got to be inconvenient, and perhaps surprising, that even in the midst of the crisis we still require our regulators to act within the limits of the law. But it does seem that Geithner needs to clarify his position on TARP repayment since right now his insistence on systemic health is in flagrant violation of the law.

Full post as published by Conglomerate on April 21, 2009 (boomark / email).