Las Vegas Sun

October 20, 2017

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Banking Column:

Carping about TARP

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 [email protected]

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