Banking Law

Banks who took TARP recapitalization investments and hung on to them have had it with being poor mouthed by pinheads in the nation's capitol. According to FinCr Advisor, they're getting so gosh darn tired of being subject to media "gotchas" that they sound like they might be channeling the spirit of Sarah Palin.

Community banks that received TARP money are bristling at the daily criticism from Washington that they are misspending the funds. Last week's release of an audit from TARP's Special Inspector General (SIGTARP) that detailed TARP spending didn't help matters.

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The watchdog report was based on a survey sent to banks that received TARP funding through January. While most of the banks reported that they had not segregated the government's funds from their own, more than 80% reporting using the funds to either make new loans or help them avoid reduced lending. More than 40% said they used the money to boost their capital cushions. About one-third said they invested the funds in agency-mortgage backed securities, positioning themselves for increased lending later. And a smaller number of banks said they used the TARP dollars to repay outstanding loans, buy other banks or had not yet allocated the funds.

Yet those findings led to headlines like "US Banks Misused TARP Money" from UPI, and "Bank Overseer Says Banks Misused TARP Funds" in The Washington Post.

One TARP recipient after another got his nose bent out of joint at all this finger-pointing and carping.

"Nobody wants to stand up for the good bankers in this deal," says Robert B. Atwell, chairman, president and CEO of Nicolet Bancshares ($636 million) in Green Bay, Wis., which received a $15 million capital infusion from Treasury last December.

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"I don't like the tenor of the whole dialogue around TARP since we got involved with it," Atwell says, noting that most people are unaware that the banks pay interest on the funds. When he answered Special Inspector General Neil Barofsky's survey, he noted that he was concerned that "a broad brush is being applied to the banking industry and to all banks that received TARP funds." 

Rusty Cloutier, president and CEO of Midsouth Bank ($937 million) in Lafayette, La., scoffs at the notion that banks are not using TARP funds to make more loans. "No bank is not trying to make loans," he says. "I wish they would stop grandstanding and solve the real problems."

Sorry, boys, as much as I sympathized with banks who took TARP capital when they took unwarranted kicks to the groin from their fellow bankers, it's been obvious for a few months now that when you dance with the devil, you don't get any sympathy when you bitch about the fact that it's hot out on the dance floor. Other TARP takers figured this out and have been paying that once-attractive TARP capital back as fast as they can raise fresh capital to do so. Anyone left in the game at this point is asking for it.

It's not fair that banks are criticized, but unfair criticism is a fact of life when you enter into a partnership with the federal government. That's reality. Get used to it. Either grow a thicker hide and ignore the sniping or do what so many of your sensible brothers and sisters are doing: pay it back.