Title: TARP and the Future: Will U.S. Be a Controlling Shareholder?
Abstract: [ILLUSTRATION OMITTED] TARP has gone from being a big piece of blank canvas to something very different. But it s still a work in progress. When Guy Moszkowski, managing director at Merrill Lynch & Co. Inc., uttered those words at a recent industry panel, it was with understatement. analogy is an apt one. Everyone from members of Congress to bankers to government leaders, to private equity capitalists to bank analysts to the man woman on the street has an idea of what the canvas should look like. Treasury has some ideas, too, but keeps reworking the picture. And there is very little apparent agreement on model, method, or medium. Everyone wants to get their hands on the paintbrush everyone is also an art critic. name TARP itself is a misnomer--officially standing for Troubled Asset Relief Program. But in the breakneck pace that dominates official responses to the economy's troubles, any bit of shorthand that helps one's head stop spinning gets adopted quickly. TARP's capital program made the fourth quarter all the more challenging for banks of all sizes. largest banks had the capital put to them, no questions to be brooked, have since been smacked by public opinion no matter how they use the proceeds. Representatives of the some of these institutions were haled before the Senate Banking Committee in early November to demonstrate that they weren't using TARP money to pay executive bonuses, such. Many other publicly traded banks faced their own quandaries, as the Nov. 14 deadline for their participation in the capital program loomed. Go for it risk being seen as actually needing capital? (And what if you don't get it?) Don't go for it risk being seen as someone who supposedly couldn't qualify? Ultimately some well-capitalized banks cited their good numbers took the money anyway. Some equally well-capitalized banks declined the offer. exhibits nearby put some names numbers to this. As of late November, some smaller public banks that had applied for TARP capital been approved by their primary regulators, had not yet received funds. And private banks only received their term sheets in mid-November, with their deadline set for Dec. 8. With all that in play, on Nov. 23, the Citibank rescue announcement altered the TARP canvas once again. One of the original nine banks required to take capital, thus supposedly not needing it, Citi ended up not only receiving an additional capital infusion, but entered into a troubled-asset takeout plan, as well. will TARP mean? In the rush of things that today's bankers haven't seen in their lifetimes, the import of what the government is doing with TARP shouldn't go unexamined. concept itself must be considered, as well as the impact on capital in the near-term, mid-term, and, potentially, the long-term. The TARP Program has served to calm the financial markets does have promise to promote renewed economic growth, ABA President Edward L. Yingling testified at a House Financial Services Committee hearing. However, it is a source of great frustration uncertainty to banks. Much of the frustration uncertainty is because of the significant numerous changes to the program misperceptions that have resulted on the part of the press the public. And nothing happens in a vacuum. What we've learned over the last 50 years is that when government intervenes in free markets, there are ripples unintended consequences, said veteran banking attorney former regulator Thomas P. Vartanian, partner in the Washington, D.C. office of Fried, Frank, Harris, Shriver & Jacobson LLP, and we have learned that it is hard to say where those ripples will go. We're in the eye of the storm right now, we have to see what happens when we meet the wall of the storm. THE CONCEPT As Yingling traced in his testimony, sudden decisions have marked everything about TARP's short life. …
Publication Year: 2008
Publication Date: 2008-12-01
Language: en
Type: article
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