Iberia Bank of Louisiana became the first bank to repay their TARP money, with interest. Unwilling to operate with a government monkey on their back, Iberia repaid the $90 million in TARP funds plus $575,000 in interest:
http://money.cnn.com/2009/02/27/news/companies/ib…
"A lot of these small-cap banks remain profitable, and it just doesn't make much sense for the government to try to dictate the way they should operate their business," said Stapp, adding "I think you'll see more banks returning TARP money."
Any way you look at it, it's a win for the bank and a win for the taxpayer. And it's at least one win for TARP.
One of my main concerns when TARP was introduced was that the feds were going to push the program on every bank like a crack dealer, and then exercise an inordinate amount of control over the operations of our nation's banking. While this is still probably a legitimate concern, at least Iberia customers won't have to worry about it.
IBKC has a market cap of less than 200MM These banks didn't lever themselves as much as the citi's and ubs' did. Does this mean that they actually used the TARP money to thaw local credit markets rather than get around the MTM accounting rules. TARP money was primarily used to put a plug on the red ink due to the write down of toxic assets (which IBKC didn't have much of).
Beta of 0.66 For a bank, they don't ride the up's and down's of the markets as much as other banks do. Then my next question is... why didn't they? Right now, they look like geniuses for avoiding these write downs, but during the boom, did they actually have the insight to avoid these dangerous businesses?
They are basically a local bank that does business in the local community. The guy selling fresh shrimp out of the back of his pickup isn't bundling CDOs on the side.
I always thought the potential for moral hazard was there when the funds were made available to banks that didn't really need them. Iberia is a prime example. I guess I just should have had faith in the government's ability to make the terms of their partnership so onerous as to eliminate any desire on the part of well-managed banks.
Might be the beginning of a trend, with the smaller banks anyway.
The government needs to decide whether TARP money is used to increase overall bank liquidity or as a profitable control stake.
Doing both doens't work, otherwise the private sector would take the stake themselves.
in any case, this is good news for everyone... i'm glad someone's paying it back. now i really hope Jamie Dimon goes to the Senate and pulls out a $25MMM (+ int.) check, walks over, and hands it to Geithner.
It would be even more awesome if he shows up with a bunch of summer monkeys in tow, each holding a garbage bag full of cash for Timmy.
lol
i was envisioning a speech alluding to how J.P. Morgan saved the markets, pre-Fed, and how it was JPM's responsibility to now lead the US banks into a better future, just as J.P. Morgan had himself done more than a century ago. he would then go on a rant about how JPM would be the pride of the nation, and, trying to preserve the american dream, they were here to prove they did not need welfare from the federal government and were going to work hard, just as their forefathers had done, to accomplish their dreams...
now enter summer monkeys.
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