Throwing a TARP (Troubled Asset Relief Program) Over It
Joseph A. Wheeler, Plansmith
Thatís a clever name for
it. What started life known as a ďbail-outĒ was renamed ďstabilizationĒ
and has eventually been transformed into a program to relieve ďtroubled
assetsĒ. The finger pointing continues and all the while your bank is trying
Whatever they call it,
todayís economic environment isnít making it very easy for the typical
banker to achieve their growth and performance targets. (Thatís a bit of an
understatement.) It probably isnít going to get easier anytime soon.
While most community bankers
stayed away from subprime lending activities they have still been caught up in
the tornado that is this lending crisis. The federal government is infusing cash
into national and regional banks establishing ownership positions, community
bankers are now worried that this new found capital will be used for
acquisitions, of them, and everyone is lining up to get their share of the $700
billion thatís been set aside by Congress.
Indy Mac, Lehman Brothers,
Merrill Lynch, Wachovia and WAMU are all gone. Fed Funds are expected to go
below 1.0%, great news for all of those positively gapped banks waiting for a
rate increase, and regardless who wins the election, it seems that tax policy is
going to change which is going to affect your bank and your customers.
All of this leads to a couple of things:
So whatís the good news?
What can you do, as a member of the board?
Allow me to offer this
Through every stage of the
current crisis from the special Federal Reserve funding, to the Bear Stearns
assisted merger, the takeover of Freddie and Fannie, the nationalization of
private companies (AIG) and all of the public failures, community banks have
While they arenít immune
from the economic fallout, they have less cleaning up to do then their larger
brethren. The mortgage and broader economic events continue to unfold, as they
will for months to come. The consensus seems to be that there will be very tepid
growth, if not a loss, in the next three quarters and that unemployment will
The latest data suggests that
capital spending is weakening and that commercial construction, after many
quarters of strength, appears set for a downturn. The other side of that coin is
that new home sales increased more than expected in September, albeit because of
lower prices, and oil is below $70 a barrel for first time in 18 months.
There are positive signs to
cling to out there. (Some are easier to hold on to then others.) Rely on your
instincts and ask questions when you need answers.
When youíre down and out,
think about whatís ahead for the auto industry.