Financial institutions that have received bailout money spent millions of dollars on lobbying in the first quarter of 2009, with much of that effort dedicated to making it easier for them to repay the money they received.
The nation's eight largest banks have spent approximately $5.5 million on lobbying so far this year, The Hill newspaper reported. All told, they have received $170 billion in taxpayer money. The spending is slightly up from the last quarter of 2008, but down 20 percent from before the economic crisis began.
According to disclosure forms filed with Congress, Citigroup Inc., which has received $45 billion from the government, spent $1.6 million lobbying in the first quarter of 2009. Bank of America Corp., which received $25 billion, spent $780,000 on lobbying.
Although banks have diverse interests on Capitol Hill, much of their recent lobbying efforts have focused on the issue of whether banks that got bailout money under the Troubled Asset Relief Program should be allowed to return it prematurely.
As BailoutSleuth has reported, a steady stream of banks have announced plans to give the money back, citing bad public relations and a desire to extricate themselves from tough regulations on matters like executive pay.
Under the laws governing the bailout, the Treasury Department has the right to refuse to accept the redemptions if it feels the bank would not be strong enough without the government money. Treasury is currently conducting "stress tests" on the 19 largest banks to see how they would fare in a more severe economic downturn.
Driving the lobbying efforts is concern about the redemption of stock warrants, the Wall Street Journal reported. In addition to giving the Treasury large amounts of preferred stock, the publicly traded banks that got TARP money also issued warrants, or rights to buy common stock at a set price in the future.
But redeeming or terminating the warrants is proving difficult. Because of uncertainty in the banking sector, these warrants have little current value, but Treasury is unwilling to take them back at today's prices. Redeeming them at the prices Treasury demands could mean the equivalent of paying as much as 60 percent annual interest, the banking industry claims.
Old National Bancorp, of Evansville, Ind., got $100 million in TARP funds in December and return the money last month. The bank said it would take a charge of $2.6 million to account for the retirement of the 813,008 warrants it issued to the government in the deal.
In a letter to the Treasury last week, the American Bankers Association requested a rule change to permit withdraw from the program without having to pay "an onerous exit fee."
So far, however, Treasury has not given any indication it is willing to comply. Officials have said they view the ability to pay back the TARP funds without restriction as a sign of financial health. Under this theory, a bank seeking to avoid paying for the warrants might be weaker than otherwise thought.
The nation's eight largest banks have spent approximately $5.5 million on lobbying so far this year, The Hill newspaper reported. All told, they have received $170 billion in taxpayer money. The spending is slightly up from the last quarter of 2008, but down 20 percent from before the economic crisis began.
According to disclosure forms filed with Congress, Citigroup Inc., which has received $45 billion from the government, spent $1.6 million lobbying in the first quarter of 2009. Bank of America Corp., which received $25 billion, spent $780,000 on lobbying.
Although banks have diverse interests on Capitol Hill, much of their recent lobbying efforts have focused on the issue of whether banks that got bailout money under the Troubled Asset Relief Program should be allowed to return it prematurely.
As BailoutSleuth has reported, a steady stream of banks have announced plans to give the money back, citing bad public relations and a desire to extricate themselves from tough regulations on matters like executive pay.
Under the laws governing the bailout, the Treasury Department has the right to refuse to accept the redemptions if it feels the bank would not be strong enough without the government money. Treasury is currently conducting "stress tests" on the 19 largest banks to see how they would fare in a more severe economic downturn.
Driving the lobbying efforts is concern about the redemption of stock warrants, the Wall Street Journal reported. In addition to giving the Treasury large amounts of preferred stock, the publicly traded banks that got TARP money also issued warrants, or rights to buy common stock at a set price in the future.
But redeeming or terminating the warrants is proving difficult. Because of uncertainty in the banking sector, these warrants have little current value, but Treasury is unwilling to take them back at today's prices. Redeeming them at the prices Treasury demands could mean the equivalent of paying as much as 60 percent annual interest, the banking industry claims.
Old National Bancorp, of Evansville, Ind., got $100 million in TARP funds in December and return the money last month. The bank said it would take a charge of $2.6 million to account for the retirement of the 813,008 warrants it issued to the government in the deal.
In a letter to the Treasury last week, the American Bankers Association requested a rule change to permit withdraw from the program without having to pay "an onerous exit fee."
So far, however, Treasury has not given any indication it is willing to comply. Officials have said they view the ability to pay back the TARP funds without restriction as a sign of financial health. Under this theory, a bank seeking to avoid paying for the warrants might be weaker than otherwise thought.
published April 22, 2009, 1 Comments
This may be a good test of honesty.
The banks made a deal with the Treasury. If they want the benefit without the agreed upon cost, that is dishonest.
Some banks do not seem to need the benefit of TARP money, this is a good thing! However, the warm blanket of TARP money came with a price. Banks entered into an agreement - in a sense a form of insurance - and that agreement had a price tag. The price tag was the Treasury's best guess risk-factored guess as to the cost to taxpayers for failed banks that took TARP money.
Just as taxpayers will be burdened with TARP-backed banks that fail, TARP-backed banks that do well should benefit taxpayers. If the bank bought the insurance, the bank must pay the premium - and must honor the warrants.