Banking Column:

Carping about TARP

Fri, Jan 23, 2009 (2 a.m.)

Just months into the Treasury Department’s Troubled Asset Relief Program, commonly referred to as TARP, there’s already a push to reform the capital purchase program of financial institutions.

Congress originally set aside $250 billion in the program, included within the $700 billion bailout enacted by Congress in October. Already the government has doled out $192 billion of the $250 billion to financial institutions across the nation and is starting another round of investment.

The week of Jan. 13 the Treasury Department made a conservative — by comparison to previous months — investment of $14.77 billion in 43 banks, although none were headquartered in Nevada.

The next round of TARP sets aside $350 billion for investment in banks, as well as a foreclosure plan that would require the government to mitigate on residential mortgages.

Rep. Barney Frank, D-Mass, introduced legislation Jan. 9 that would require financial institutions that receive the funding to report quarterly on their use of the funds.

As introduced, the legislation — TARP Reform and Accountability Act of 2009 — would also require inclusion of smaller financial institutions shut out during the first round and increase transparency of participating banks.

Early in the program, a handful of banks with operations in Las Vegas sold stock to the government. I made a round of calls to those banks to find out what, if anything, was being done with taxpayer money.

City National Bank received $395 million from TARP. The funds were initially intended to “strengthen balance sheets and ensure banks remain in a strong position to make it through some murky waters ahead of us,” said John Guedry, executive vice president and manager of City National’s Nevada region.

The funds were an investment in the company, and like other investments, the company doesn’t break out its use of the money, he said. The bank isn’t parceling the money out to New York, California or Nevada (its three markets) in any set amount for loan issuance either, he said.

But, he added, “we are continuing to lend, which some banks are not, in a prudent way ... We make loans to whomever is qualified.”

Nevada State Bank’s parent Zions Bancorp received $1.4 billion in TARP funds.

Although the bank can’t yet disclose the amount being directed to Nevada (the quarterly report has not been posted), “Zions is passing it down to all the affiliate banks,” the bank’s chief financial officer, Terry Shirey, said.

“The bottom line is it frees up capital for lending and that clearly is our intention,” he said.

This month the bank started an advertising campaign seeking qualified borrowers, he said.

TARP, Shirey said, is “good for the community and that’s the intended use of the funds.”

Wells Fargo received $25 billion from the capital purchase program.

“We intend to use the ... funds to make more loans to creditworthy customers and to find solutions for our mortgage customers late on their payments or facing foreclosure so they can stay in their homes,” Wells Fargo Nevada spokeswoman Natalie Brown said in an e-mail.

Wells Fargo, too, hasn’t yet released its fourth-quarter earnings, so couldn’t discuss the past three months in detail.

“Since the start of the credit contraction over a year ago, we’ve been ‘open for business’ for our creditworthy customers,” she said. “At the end of the third quarter, our average loans were up 15 percent from the previous year and 13 percent (annualized) from the previous quarter. Since mid-September when capital markets contracted, we’ve led the industry in lending to creditworthy customers.”

Western Alliance, Bank of Nevada’s parent, received $140 million from the capital purchase program, but did not return a call for comment by press time.

Speaking to The Washington Post editorial board Jan. 15 — less than a week before his inauguration — Barack Obama called the financial system “rickety” and said he has requested a second round of TARP.

“We can’t just spend our way out of the problem,” he said. “At some point credit has to flow effectively.

“The credit markets are still very weak, ... banks now are fully caught up in a downward spiral where they have now affected the real economy, the real economy is now affecting their balance sheets, and so we’re going to have to intelligently and strategically infuse some additional capital into the financial system.”

Nicole Lucht covers health care, workplace and banking issues for In Business Las Vegas and its sister publication, the Las Vegas Sun. She can be reached at 259-8832 or at nicole.lucht@lasvegassun.com.

Discussion: 2 comments so far…

Comments are moderated by Las Vegas Sun editors. Our goal is not to limit the discussion, but rather to elevate it. Comments should be relevant and contain no abusive language. Comments that are off-topic, vulgar, profane or include personal attacks will be removed. Full comments policy. Additionally, we now display comments from trusted commenters by default. Those wishing to become a trusted commenter need to verify their identity or sign in with Facebook Connect to tie their Facebook account to their Las Vegas Sun account. For more on this change, read our story about how it works and why we did it.

Only trusted comments are displayed on this page. Untrusted comments have expired from this story.

No trusted comments have been posted.

By MC_Shalom

Jan. 24, 2009

3:54 a.m.

Flag

You Bail Them Out, We Opt Out

Chairman Ben S. Bernanke,

All of Our Economic Problems Find They Root in the Existence of Credit.
Out of the $5,000,000,000,000 bail out money given out to the banks,
$1000 for every inhabitant of this planet, what is it exactly that We, The People, got?
If my bank doesn't pay back its credit how come I have to pay mines?
If my bank gets 0.00% loans, how come I don't?
At the same time, everyday, some of us are losing their home or even their jobs.
Credit discriminates against people of lower economic classes,
As such it is unconstitutional, isn't it? It is an supra national stealth weapon of class struggle.
Credit is a predatory practice. When the predator eats up all his preys he starves to death.
What did you expect? Where are you exactly in that food chain?
Credit stands up against all the principles of both equal opportunity and free market.
Credit is a Stealth Weapon of Mass Destruction.
Credit is Mathematically Inept, Morally Unacceptable.
You Bail Them Out, We Opt Out.
My Solution: The Credit Free, Free Market Economy.
Both Dynamic on the Short Run & Stable on the Long Run.
I am, Hence, Leading the Exit Out of Credit.
Opting Out Is Both Free and Strictly Anonymous.
Let me Outline for You my Proposed Strategy:
My Prescription to Preserve Your Belongings.
The Property Title: The Free, Strictly Anonymous Right to Opt Out of Credit.
The Credit Free Money: The Dinar-Shekel AKA The DaSh, Symbol: - .
Assets Transfer - The Right Grant Operation - Mutiply Your Wealth.
A Specific Application of Employment, Interest and Money
[A Tract Intended For my Fellows Economists].
If Risk Free Interest Rates Are at 0.00% Doesn't That Mean That Credit is Worthless?
Since credit based currencies are managed by setting short-term interest rates,
on which all control has been all but lost, are they managed anymore?
% We Need, Hence, Cancel All Interest Bearing Debt and Abolish Interest Bearing Credit. %
In This Age of Turbulence The People Wants an Exit Out of Credit:
An Adventure in a New World Economic Order.

The only other option would be to wait till most of the productive assets of the economy get physically destroyed either by war or by rust.

It will be either awfully deadly or dramatically long.

A price none of us can afford to pay.

The current crisis can be overcome only by developing a sense of common purpose.
The alternative to a new international order is chaos."

- Henry A. Kissinger

What Else?
You Bail Them Out, We Opt Out.
Check out How Many of Us Are Already on Their Way to Opt Out of Credit.

Let me provide you with a link to my press release for my open letter to Chairman Ben S. Bernanke:

Chairman Ben S. Bernanke, Quantitative [Ooops! I Meant Credit] Easing Can't Work!

I am, Ben S. Bernanke, Yours Sincerely,
By johnevegas (John Palmer)

Jan. 24, 2009

4:25 a.m.

Flag

MC_Shalom "Credit is Mathematically Inept, Morally Unacceptable."

This is an odd rant MC. I really get that you do not like credit, but, I cannot for the life of me substantiate anything you said.

Credit is Mathematically Inept? Morally Unacceptable? What the name of Amadeo Peter Giannini are you talking about?