Is the Treasury Department Contemplating TARP Closeout Sales?
By Kevin Funnell, Bieging Shapiro & Barber
When word leaked out recently that the US Treasury Department was
considering selling the preferred stock it held in over 350 banks as a result
of its TARP capital injections, I think the remaining TARP banks had a mixed
reaction. On one hand, there’s always the advantage of dealing with the devil
you know as opposed to the devil you don’t. It’s theoretically possible that
Treasury might sell the whole kit and kaboodle to Gordon Gekko, who might
downsize some his acquired banks with extreme prejudice.
On the other hand, there’s always the disadvantage of
continuing to deal with a federal bureaucracy that is motivated by factors that
focus less on the bottom line than on measuring the political wind’s speed and
direction. Ask a TARP bank that’s tried to negotiate a “haircut” on repayment
of TARP stock in connection with a merger or acquisition transaction how
political considerations (i.e., how Treasury can insulate itself from
being criticized during the period starting now and ending with The Rapture)
trump common business sense. If you have a savvy private equity investor owning
your stock, you might ultimately be screwed, but at least you’ll have a chance
of understanding why.
Opponents of the original TARP will never admit that they
might have been wrong about the need for the program to save the economy from
ruin. The fact that the Treasury has already made a profit on its original TARP
investments ($20 billion so far, according to the linked article) is
meaningless to them. I guess they wanted to let the “creative destructive”
forces of a “pure market system” work their magic on all of us, and
if we ended in standing in bread lines, they’d say that was a hard lesson
learned and that we’re all the better for it. I don’t have the energy to tell
them that not only is God dead, but so is Ayn Rand.
So, if I take pot shots from the peanut gallery at the
administrators of TARP, I still think that it was a good idea, albeit one that
could have been executed a heck of a lot better than it was.
