When you hit the Maryland shore this summer, you'll find plenty of yummy soft shell crabs to eat. However, you won't find banks stumbling over each other to get at the latest iteration of TARP. I mean, what's the US government trying to do, turn TARP into a franchise like Harry Potter or The Terminator? Come to think of it, The Terminator might be apt.
“If this proposal walks, talks and smells like TARP, very few banks are going to want to participate in it,” said R. Michael Menzies, CEO of Easton Bank and Trust Co. and chairman of Independent Community Bankers of America.
It smells like TARP, alright. TARP that's been left out in the sun for three weeks, then thrown into a vat of rancid yak fat to give it that piquant bouquet that one finds wafting off of only with the finest brands of EPIC FAIL.
For bankers like Richard Oppitz, the program won’t solve what they see as the biggest roadblock to more small-business lending: a dearth of credit-worthy businesses looking to borrow money for expansion.
“We have plenty of capital and money to lend,” said Oppitz, regional president for Essex Bank’s Maryland division. “It’s just a matter of finding qualified borrowers.”
Bankers are also worried about mixed signals from the government.
The Obama administration is encouraging banks to make more small-business loans while federal and state banking regulators have been carefully scrutinizing the loans the banks have already made, Oppitz said.
“For banks, what really counts is what the examiners say, not what the people back in Washington say,” said Bert Ely, a banking consultant.
Of course, we all know how well the coordination between Washington, D.C. and the examiners in the field is working on commercial real estate loan loss reserves and collateral write downs, don't we? I'm certain that the same Marine Corps Drill Team lockstep coordination will prevail with this program.
While this time around the government is promising there won’t be the same kinds of strings that came with TARP, such as restrictions on executive compensation, community bankers aren’t convinced. They’re fearful of signing up for the program, only to find the Treasury Department changing the rules in mid-stream, as happened before, said Gerald Blanchard, a partner in the banking group at law firm Bryan Cave LLP.
“The banks were appreciative of the capital, but they weren’t appreciative of all the strings that came with it,” Blanchard said.
It's hard to believe that bankers aren't trusting the word of the federal government that it won't trick-screw participants with after-the-fact changes to the deal. After all, they're the government, they're here to help, and they'd never employ The Flounder Defense.
Hanging over everything is the fear that customers and investors may again view banks that choose to participate as financially weak. That could keep banks from signing up, said Frank Bonaventure, who chairs the financial institutions group at law firm Ober Kaler.
“TARP was very much misunderstood by the general public,” Bonaventure said. “It wasn’t a bailout, because it came with some significant costs that had to be paid back.”
It's not merely a matter of being "misunderstood by the public." As we've noted previously, some banks who didn't take TARP money have waged advertising campaigns against those who did, using the fact that their competitors took TARP as somehow branding them as almost Un-American.
We expect that if Congress ever actually enacts legislation to authorize this latest waste of taxpayer money, there will be a number of banks that will step up and take it. On the other hand, I think that number will be relatively low. Most banks will treat it like toxic waste.






