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WTF: Banks Want to Rewrite the TARP Payback Rules
Didn't we get lectured on why executives who were promised million dollar bonuses should get them even if their efforts on their own behalf screwed the economy and led to the ruin of their companies. The contract was to be honored at all cost.
Now that the shoe is on the other foot, that is, some TARP recipients are ready to pay back the government, they want to rewrite the contract. They want to forego paying the interest and other financial obligations they had agreed to when they got the money. The want a free loan. When was the last time a financial institution gave you a free loan? If in fact they have recovered, we are still paying for the effects of their transgressions.
Will Obama let them off the hook?
Now that the shoe is on the other foot, that is, some TARP recipients are ready to pay back the government, they want to rewrite the contract. They want to forego paying the interest and other financial obligations they had agreed to when they got the money. The want a free loan. When was the last time a financial institution gave you a free loan? If in fact they have recovered, we are still paying for the effects of their transgressions.
Will Obama let them off the hook?
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In the words of the immortal philosopher Gomer Pyle:
Suprise! Surprise! Surprise!
And guess what? Geithner/Obama is going to agree to let them screw us all over. I hope I'm wrong, but know I'm not. Just watch.
May 20, 2009 12:43 PM | Reply | Permalink
"Geithner/Obama is going to agree to let them screw us all over"
No they won't.
To hope is to believe...
May 20, 2009 1:35 PM | Reply | Permalink
But, let's all scream "YOU BETTER NOT LET THEM SCREW US, FUCKER!!!!!!!!" real loud anyway, just to be sure Obama knows we're still with him.
May 20, 2009 2:48 PM | Reply | Permalink
Good point. Fuck, very good point kgb. Scream from all your rooftops if you have to.
May 20, 2009 3:19 PM | Reply | Permalink
Okay, I'm game. It sure can't hurt, but it probably will do no good. He's chosen the groups he is going to favor and the little people are last on the list.
May 20, 2009 5:28 PM | Reply | Permalink
It would truly be a slap in the face if they do not pay the interest they promised when we bailed them out. We need a more consumer-oriented movement to refuse to do business with these banks if they are not willing to follow the terms of these loans. If the people lead, the leaders will follow.
May 20, 2009 1:30 PM | Reply | Permalink
What exactly are you proposing? Isn't it pretty much all banks everywhere at this point? If we even spend cash, it ultimately goes to them.
Maybe just stop using their money ...
http://www.usatoday.com/money/economy/2009-04-05-scrip_N.htm
(only half-joking)
May 20, 2009 2:56 PM | Reply | Permalink
How about a US postal Bank?
May 20, 2009 10:31 PM | Reply | Permalink
I'm up for more bartering!
May 21, 2009 3:30 AM | Reply | Permalink
So how is this different from anything our government has delivered for the last thirty years or so? I don't see it.
May 20, 2009 5:39 PM | Reply | Permalink
Ok, I'm going to jump in with the contrary view.
First the disclaimer :
My opinion is biased by the fact that I work for one of the banks eager and able to pay off our TARP debt.
My argument :
We never needed and never wanted TARP money. My employer runs an honest, responsible bank which didn't gamble with depositors money.
As a result, over the past decade my employer stood out as a relative poor performer compared to the likes of Citi and AIG. Consequently, our compensation and bonuses (including that of our CEO) were modest compared to the going rate at Ponzi-corps like Fannie Mae.
But when it came time to bail out the insolvent banks, The Fed pushed VERY hard to be sure all large banks took TARP funds so that TARP recipients wouldn't be stigmatized. We have continued to make profits, and have never been in danger of insolvency. But not wanting to induce a panic in the markets or invite the wrath of The Fed, my employer complied with the directives of The Fed and took TARP money.
Now, with the risk of panic receding we want out!
We have been modestly rewarded for responsible behavior by a small influx of business due to the "flight to quality". But this has been mitigated by a successful effort to NOT highlight the truly insolvent beasts like BoA/Merell.
So I'm sorry if we want out. But we're getting tired of carrying other banks water, and getting paid shit for our honesty. In the end, we'll probably honor all the warrants, because we don't employ an army of lobbyist.
The moral here: if you want to be sure no one runs an honest business next time around, be sure you screw the honest guy hardest this time around.
May 21, 2009 12:12 AM | Reply | Permalink
Great. What's the name of the bank? The bank should let it be know the circumstances under which they took TARP money.
May 21, 2009 5:40 AM | Reply | Permalink
And let the banks who were really in trouble pay for your bank's loan costs.
May 21, 2009 7:28 AM | Reply | Permalink
I haven't made any statements that aren't available from public source, and the opinions expressed are my own, not those of the bank - so hopefully I'm not breaking any rules when I say I work for US Bank.
May 23, 2009 4:08 PM | Reply | Permalink
Unfortunately, your bank did take the TARP money, and did so (let me see if I understand this) under pressure from the government. Still though, the government's argument was essentially "we don't want your competitors to look bad." On balance, the bank took the TARP money anyway although I suspect far less than other larger institutions. The impact of the warrant sale should therefore be somewhat small, if the execs didn't get overly greedy with what they took from the fund. The bank knew (or for pete's sake should have known) the risks on each side, and made a judgment call. Now it has to live with it.
These scenarios will be used as ways to bail out the bad actors, because once the principle is conceded there is no stopping point. To be blunt, if your bank gets let off the hook, CITI and BOA will be there yelling and screaming "Why not us?" So if it's a choice...
May 21, 2009 12:04 PM | Reply | Permalink
Fair enough. I do agree with the point that the US government (acting as our money manager) should not concede the point that warrants must be honored.
And you are right; a contract honestly entered should be binding and should be honored. And the money did come at good rates, so I'm sure taking TARP money didn't exactly cost our bank a lot of money.
I guess I find myself whining because we (at my employer) just like all of America are paying for the greed and irresponsibility of others; but for the moment at least "we" as bank look a lot like those others, irrespective of the fact that I believe we acted differently.
Obviously, these are my opinions and do not represent the views of my employer.
May 23, 2009 4:34 PM | Reply | Permalink