Shedding The Taint of TARP

An interesting dichotomy is emerging in the banking industry as of late. Large money center banks are bowing out of the Treasury capital assistance program affectionately know as TARP. At the same time smaller regional banks are more than willing to hold on to the capital and are not concerned about blemishing their reputations.

Big banks are doing their best to jettison TARP dollars and repurchase the associated warrants the government took as a condition of assistance. Large banks are making it crystal clear they don't need the money and are giving a mission accomplished reason for the change in disposition.

Ditching TARP is being used to convey a sense of strength and independence to investors and customers alike. Big banks are making every case they can to wiggle out of the grand bargain offered to them in the darkest hours of the financial crisis of 2008. For example, the form letter below is being sent out by U.S Bank to it's commercial customers to extol the virtues of being TARP free.

US Bank TARP Memo - Get more Business Documents

Meanwhile in the realm of smaller more humble banks the landscape is much different. A article appearing in the WSJ and cited all over the internet reveals that smaller regional banks have been more than happy to hold on to their TARP allocations. Apparently the smaller more sensible banks have decided to meet one of the objectives of the program - provide credit for business investment.

The behemoths on the other hand are more concerned about demonstrating they can maintain adequate capital levels without help from Treasury. Extending credit to small businesses is ancillary at best. The other perk of course is the ability to dodge executive pay caps and somehow prevent the inevitable regulatory smack down that is on the horizon.