Banking a U-turn

Banks say, "Thanks, but no thanks" on that bailout to nowhere...

Today, New York Times Journalist Steven Labaton published a story about the major banks that are having a hard time swallowing the new rules that come along with taking federal money in the bailout. This article has raised a number of responses on the topic and I want to cover some of these positions and what this could mean for the financial bailout.

First, each of these banks has accepted bailout funds to help keep their institutions afloat. They have accepted cash, from the federal government because they were in financial trouble. This is what we were told when the bailout began and why the people have asked for accountability regarding the spending of these funds. Let's talk about the banks that are taking the bailout money and talking about giving (or have already given) the money back:

1. Goldman Sachs - $10,000,000,000
2. Wells Fargo - $25,000,000,000
3. TCF Bank - $361,172,000
4. Signature Bank - $120,000,000
5. Johnson Bank - $100,000,000
6. MidSouth Bank - $20,000,000
7. Bank of America - $15,000,000,000
8. IberiaBank - $90,000,000
   

However, over the past few weeks, beginning with IberiaBank on February 27th, many of these banks have stated that they are considering returning the money to the government early due to new restrictions / rules that have been attached to the TARP funds including holding off on evictions and modifying mortgages citing that the new restrictions are more than they bargained for. IberiaBank plans on repurchasing their stock (which was sold to the federal government under TARP) on March 31st, instigating a cascade of similar responses from banks that also want to Bail Out of the Bailout!

Of course the immediate question on many people's minds, including Dana Houle posting on DailyKos is: If you didn't need it, why did you take it?

It seems to me that with many of these smaller banks, as John Marshall posting on TPM explains, not truly hurting like the major financial institutions like Goldman Sachs, is that they kind of jumped on a bandwagon, right? As though, hearing that Sachs is getting TARP funding, these banks said, "Hey. Maybe we can help subsidize our losses too and since clearly no one is asking for any kind of accountability, we can just grab a little piece of the pie and probably no one will notice." Except that people have noticed and, even more importantly, are asking what is going on with that money?

A great example of this is pointed out by Charles Karel Bouley posting on Huffington Post, citing Bank of American's unwillingness to publicly account for bonuses paid to its officers using bail out money. I believe this is a great time for Seth Myers of SNL to do a "Really?!?!" segment on the bailout. If you have never seen one, I would suggest this one on Governor Blagojevich.

So if you did not accept this money because you were truly in dire straits, as I thought was sort of suggested in accepting bailout funds in the first place, then why did you take it? C.R. Cloutier of MidSouth Bank explains;

I hope they can finally tell me just what they want community bankers to do. It was sold to us by the feds as a partnership, but its turning out to be something very different. Its looking more and more like the federal government wants to treat this like it was a needs-based issue, and we didn't need the money.

Fair enough. You were under the impression that this was an opportunity for you to help out your local community and were just accepting the funds to enable your bank to loan money and help out. Alright. Sorry to drag you into this. IberiaBank supposedly took the money to free up credit markets in Louisiana and to consider purchasing failed banks in the region.

Wait! Are you telling me that we are putting money into super-sized banks and bailing them out because they are lumbering, unregulated giants, and then asking smaller banks to build up to become larger banks? And there's more! Apparently IberiaBank is returning the money because they've recently made a ton of capital through a matching program from investors.

Let me get this right -

• The government gives you money to invest in the local community
  
• Meanwhile, you make money on the government giving you money through investors
• Then you give the money back saying, "Thanks, but no thanks" when asked to provide more information about your bank to the government regarding salary and bonus information
• In the meantime, making, what essentially amounts to interest on that money, and then walking away with the free money. And you're not the only bank that is doing it?

We've been duped again!

Look, I understand that many of you are not failing and you have been given money under different auspices than the failing institutions. But, your issue with the bailout money is that you have to disclose information regarding your chief officers? C'mon. Don't act like you're trying to help the country, if you're not really trying to help the country.

So the Opinion,
1. We've lost the battle on getting this whole thing under control. We have to ask the tough questions, we cannot take no for an answer, and we have to do it now. It's time for congress to get on this oversight thing. Maybe by either beefing up the Congressional oversight or appointing an independent board
2. Any bank that has made any kind of dividend from the TARP or Capital Purchase Program should be heavily taxed for it if they want to return the money, or it should be seized by the federal government, or they should pay more for those stocks than they sold them for (kind of like an early repayment fee)
3. We should break apart the over-sized companies, or fully federalize them as they can't seem to be accountable to the people
4. We should not trust banks. They are inherently not capable of making nonprofit decisions. They are for-profit institutions. Why we ever expected them to do anything for the greater good is a failure of logic. Stop giving banks money!

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Today's Quote
"There's an old saying in Tennessee. I know it's in Texas, it's probably in Tennessee that says 'Fool me once, ...Shame on ...Shame on you ...You fool me, can't get fooled again"
President George W. Bush