Posted on 02/05/2009 6:44:30 AM PST by Dudoight
Rivalry between normally polite banks is getting down, dirty and very public with some using the government's TARP program as a handy target.
Just ask Alan B. White, the entrepreneurial founder-president of Dallas-based PlainsCapital Bank, who is lashing back at competitors who slam his participation in the U.S. Treasury's Troubled Asset Relief Program, aimed at jump-starting the economy. PlainsCapital received $87.6 million from TARP.
(Excerpt) Read more at mcclatchydc.com ...
The best line in the article is bank president Alan B. White’s statement that he didn’t take TARP funds as a bail out but took TARP as an OPPORTUNITY.
I can’t believe it.
Modern day carpetbagger.
Welfare whore is closer to the truth!!
If anyone is interested, check out Frost Bank. Frost is only in Texas and is not a recipient of tarp or bail-out money. Frost got out of mortgages 10 years ago or so,,,and they are doing just fine. That is, until Congress notices them and decides to take them down.
Our locally owned bank would not take the TARP $$$, saying that there were too many Federal strings attached and they would not be able to do business under those circumstances.
I’ve already let my bank know that if they take TARP money, I will be leaving for an organization that didn’t, and I will be encouraging everyone I know that banks there to do the same.
My wife says “why bother, you are not a big enough customer for them to care.” Well, she may be right. If enough “little” customers leave, they will feel the sting. People at this yahoo’s bank in TX need to leave, en masse; especially considering he states he didn’t need the tax payer’s money, he just took it, because it was opportune.
For example, from the article:
"Nobody gave me anything. I am having to pay 6.4 percent as a preferred dividend to the government."
This bank went to the government and borrowed money at 6.4% interest. The government raised those funds by selling treasury bills at 1-2% depending on the length of the bills.
So, unless the bank goes out of business, taxpayers are making good money on this deal. It may not be normal for banks to borrow from the government, but the point of TARP was that banks were not able to borrow from other banks, so the government would step in and borrow money.
This is another case where TARP won't actually cost us 700 billion, and in fact could turn out to make the government money.
On the other hand, TARP was set up for banks that needed money and couldn't get it elsewhere, so it is a bit absurd for banks that COULD borrow elsewhere, or don't need the money at all, to take TARP just because it's there.
That's the problem with most "needs" programs, keeping people who don't need them from using them.
BTW, I love that companies that didn't take TARP are making it an issue, because that is one way to keep TARP from becoming generally accepted. I just don't want us at FR to mistakenly use terms like "giveaway" or "bailout" when it is nothing of the kind.
Some banks' subprime mortgages have had a high failure rate because they were issued to unqualified borrowers. These risky loans, bundled with higher-rated mortgages and sold as securities, are seen as a major cause of what has become a global banking crisis.
There's the tip-off. Lend to anyone and get that lucrative commission and dump the worthless paper on someone else - ultimately the taxpayer.
One thing I am not going to do is loan to people who won't pay me back," White replied when asked how the TARP money will influence his lending criteria.
Hello? As above, why didn't he do that earlier? We gonna believe him now?
I got an Ice-cream, and you can’t have none, cause yo mama’s on the welfare....
Well...those lovely company trips and other luxury add-ons from last fall’s ‘bailout’ prove your words correct. As to ‘bailout’ for those guys, it was NO bail out.
Even if they DO pay it back, (and considering the imminent economic uncertainty, will they?)borrowing, borrowing, borrowing is not the best path to economic stability.
That is strictly MY uneducated opinion.
You really got to hand it to the banks and financial institutions who DON’T “borrow” TARP funds.
Banks exist on the concept of borrowing.
When you deposit money in a bank, they are essentially “borrowing” it, and paying you interest.
They then take the money and lend it to other people with a spread, and their profit comes from the difference between what they pay you for the use of your money and what others pay the bank.
In the specific example in the article, the bank is using the TARP money right to meet capitalization requirements.
They plan to lend that money out for JUMBO loans, I presume because they can set a higher interest rate on the JUMBO loan than the interest rate they had to pay the government.
Well, maybe not. Because capitalization requirements are a fractional value. If they have a million in the bank, they can lend a lot more than a million.
So if they borrow 100 million from the government at 5%, and then lend out 200 million at 4%, they will make 3 million a year (5 million in interest paid vs 8 million in interest earned).
The purpose of the TARP was to provide capital to allow banks to lend, so if the bank does create loans from the TARP money, it’s working as designed.
There are other parts of TARP where government actually buys portfolios from the banks. If the government pays more than market value, that is a bailout.
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