There is no "A, R or P" in the government's Troubled Asset Relief Program, quipped U.S. Bancorp Chief Executive Richard Davis Tuesday morning in front of about 300 business people in Minneapolis.
"It's just troubled," the 50-year-old CEO said at the Thrivent Financial for Lutherans' Business Leaders Forum. The forum invites executives to discuss how business and their principles intersect.
Davis ... said banking remains a critical part of society, despite its current troubles.
"Bankers are dream makers," he said. "We don't make anything. We don't build anything. We don't fix anything. We don't break anything. We get behind everyone who does."
But Davis was critical of the U.S. Treasury's Troubled Asset Relief Program introduced last fall, saying that while the program was well intended, it has turned out to be "lousy."
Created to encourage lending to small businesses and consumers, TARP started by shoveling tens of billions of dollars at the country's biggest banks but soon was expanded to include banks of all sizes. Minneapolis-based U.S. Bancorp got $6.6 billion.
"I will say this very bluntly: We were told to take it. Not asked, told. 'You will take it,' " Davis said. "It doesn't matter if you were there on the first night and you were told to sign on the dotted line before you walked out of the office, or whether in the days that followed, you were told to take it."
But by Tuesday afternoon, a U.S. Bancorp spokesman said Davis had misspoke, and meant that because the largest banks in the country took TARP money, U.S. Bancorp and others were forced to do so as well, for competitive reasons.
Davis went on to say in his talk that while government officials marketed the program as a way to entice banks to lend again, TARP actually was designed to give solid banks like U.S. Bancorp some extra cash to buy weaker banks in the system. U.S. Bancorp did just that late last year when it acquired the assets of two failed banks in California, Downey Savings and Loan and PFF Bank & Trust.
"We were told to take it so that we could help Darwin synthesize the weaker banks and acquire those and put them under different leadership," he said. "We are not even allowed to mention that. ... We were supposed to say the TARP money was used for lending."
But Davis is talking about it now, he says, because he and others oppose current and future strings attached to the program. Davis didn't detail those strings, but he said he and some peers intend to voice their opinions to Washington, D.C., soon.
"Now they're punishing you for having the capital," he said, adding that he refuses to stand by and let his company become "collateral damage" in an attempt to nationalize the banks.
This is what happens when you have business decisions being made based on political reasoning. Congress forced banks to take this money -- whether they wanted it or not -- then they turned around and hammered them for having excess capital. Hey, I suppose it just makes sense, since Congress forced mortgage companies to make risky loans, and then began hammering those same mortgage companies when the risky loans defaulted. Are we seeing a pattern here?
But don't worry...TARP never actually happened:
An amazing bit of news in The New York Times editorial page today. Turns out that all that TARP money that was supposed to go to the banks is not going to the banks at all; it's going to the holding companies that own the banks . . . among other commercial enterprises. And it further turns out that of the $90 billion those holding companies have received, only $15 billion has gone to their subsidiary banks.
So what we've got here, essentially, is a government program to subsidize the economic losses of bank owners. It's as if we tried to save GM by sending checks to GM stockholders. Would they plow that money into GM? If they think nationalization is coming, no. If they think that GM is probably doomed in the long run, no. If they think that more direct federal help will be forthcoming, then no — they'd pocket the cash and let the taxpayer recapitalize the company later.
How is it that this crucial bit of fact about the true nature of the TARP has eluded reporters, politicians, and pundits for so long? The lack of transparency about how this money is actually being spent is probably one reason. Chalk up another debit on the Bush administration.
For the record, I don't support bailing out the holding companies or the banks. But if we are going to undertake "Operation Bank Bailout," it would be nice if federal policy would actually be executed as promised. Bailing out bank owners is even less defensible.
*sigh*
Then will the madness stop? Not until we vote the current crop of elected 'leaders' home, that's when.
There's my two cents.
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