Posts Tagged ‘TARP’

Have you checked your Bank Statement lately??

Monday, July 13th, 2009

While the “Too Big to Fail” Banks make the news each and every day on issues ranging from TARP to Compensation, the real story of what is happening to the consumer goes unnoticed.

Have you checked your bank statement lately? Chances are that you are experiencing some of the following:

  • Higher Fees on bank services
  • Higher Interest Rates on Credit Cards & Loans
  • Termination of Credit
  • Termination of products (such as Passbook Saving Accounts)
  • Additional Fees on existing products
  • Branch closures with inconvenient relocations
  • Relocation of your safe deposit box
  • Loss of your experienced Bank Representatives
  • Complete, intentional disruption of longtime relationships

 The same banks that disregarded their customers are now requiring that they pay for management’s poor decisions, and reckless risk taking.

 Certainly at North Jersey Community Bank, we have always put our customers first; and do not take advantage of these times, because we can… We are interested in the long term picture, in enduring client relationships, and in keeping true to our mission of being “A Better Place to Be.”

 What has your bank done?  Do you have a personal relationship with your banker? Have you invested the time to create a relationship with a bank that understands your business, knows your history, and can react to the changes occurring in your environment?

 It is important today to not take for granted your banking relationship, especially if your bank has taken you for granted…

 There are over 7000 Community Banks in this country that are ready, willing and able to put their customers first; after all, that is the only way they know how to do it…

Why we should be Stressed over the Stress Tests…

Sunday, April 19th, 2009

With all the talk of the Government Stress Tests lately, I thought some rational explanation was warranted..

First, banks have been required to stress test their balance sheets since their original formation, including any denovo institution. All banks undergo regular regulatory exams which include stress testing of their balance sheets under various, interest rate, credit risk and capital scenarios.

Second, the nineteen banks that are part of the “Stress Test” being discussed could not be in a more varied set of businesses… On one hand we have the largest deposit gathering bank in the country, and on the other, a bank with virtually no deposits or branches, and every other type of business that a bank holding company might have, including investment advice, mortgages, real estate, hedge funds, derivative products, insurance, etc… How is it possible that one test will identify the strong from the weak in this set of banks?

The Stress Test although well intentioned, has added a political side to appease the populist voice being heard by our leaders…

It is clear to me that none of these nineteen “too big to fail” banks can, or will fail the stress test… Instead we will hear about how our banking system is safe from catastrophe, and that some of these institutions may need some additional capital to weather an impending storm. If the institutions are unable to raise the additional capital in the private sector, then they will be able to use a new TARP II funding program.  That’s when the fun will really begin.

Congress is not ready to appropriate more money to this cause; the banks will not like the terms of any new TARP II program…

And once again, we find ourselves concentrating on those that have created this mess, and looking for the best way to bail out banks that should be broken up instead. All this while the solvent, strong and functioning community banks receive no help, and worse, are being forced to pay a FDIC assessment which will substantially reduce not only their ability to lend, but will exacerbate the downward spiral of lower earning, lower share price, and difficulty in raising new capital.

Instead let’s look to support our community bank system and the economy by:

  • Eliminating the FDIC additional assessment altogether
  • Create a tiered FDIC fee arrangement that rewards traditional banks with a lower fee structure, and charges more for the bigger risk takers; peg fees to assets, not deposits
  • Reducing the Regulatory and Tax Burden on Community Banks
  • Incent more lending by allowing 1 & 2 Rated banks to lower their capital ratios; and/or provide a low cost TALF alternative geared toward community banks
  • Support the Federal Home Loan Banks, allowing community banks to better participate with first time home buyers, and those seeking to refinance


Our leaders need to understand that it is the community banks that are currently expanding, lending, hiring, and growing profitably which is providing the fuel that economy so desperately needs. Let’s get on with the Stress Tests, and then take a step back, and look to support those that know how to get the job done (our community banks)  and then onto how to re-sculpt the financial landscape so that we never have a systemic risk again…

Have you been TARPed yet???

Sunday, April 5th, 2009

TARP (Troubled Asset Relief Program) was originally meant to support those banks deemed to have capital issues, so that a catastrophic failure of our financial system could be avoided, or to get healthy banks to lend at a faster clip to stimulate the economy. How anyone could not have known, or predicted that TARP’s passage would actually endanger our capitalist system, and pose what may be the greatest threat that entrepreneurs and Main Street businesses have ever faced, is hard to understand… Do you remember the quote “we’re from government, and we’re here to help.”

Let’s take a quick look at how TARP has morphed…

  • Banks deemed “Too Big To Fail” are forced to accept TARP funds whether they want the capital or not…
  • Due to populist outrage over the AIG bonus debacle, all TARP recipients must follow new government guidelines on compensation and bonuses.
  • The President forces out the CEO of General Motors and orders the company to start building smaller and more energy efficient cars, as a condition of receiving additional TARP funds.
  • Chrysler is being forced into a merger with FIAT, and now the banks that hold its loans, who are TARP participants are being pressured into converting their debt to equity.
  • And now, TARP is being used to support the new Public Private Investment Partnership (PPIP) which although may be needed in concept, will serve to only reward the very largest investment companies, and in some cases the very same people that got us into this mess. Main street investors need not apply. Only a select few Investment managers will be allowed to invest with the Treasury to make outsized profits, and the FDIC will guarantee any losses…
  • Banks that have accepted TARP are now scurrying to figure out how to repay… One needs to question the decision making process that went on at any of these banks. The Boards and Managements Teams need to be questioned and in some cases may need to be replaced. As a shareholder, I would be outraged that management recommended, and the board approved, a contract wherein the other side retained the right to make changes at any time… It is clearly a breach of the fiduciary responsibility that is expected and required of those positions.

 Main Street businesses, investors, or individuals get to pay the price with higher taxes, higher FDIC assessments (which they will pay as a pass-thru from their banks) and more regulations. The program does not do anything to help those that have a troubled loan, a troubled mortgage, or face the downdraft in the economy created by the irresponsibility of the “Too Big to Fail.”

 No one wants TARP because of what it represents; the darkest side of our government reaching into, and trying to run our businesses. That is not what made America great..

 What we need today are programs that are designed to help those that have acted responsibly, and have been the engine of growth for this country; the local main street businesses, and community banks. Incent the entrepreneurs with tax credits for hiring, buying new equipment, and for making new investments in factories, offices and stores. Grant tax and regulatory relief for those that have proven to ability to “get it done,” and return to a system where calculated risk taking is rewarded, and reckless activity punished…That, is what has made America great.