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A BIGGER TARP
Just like at a picnic when the skies open up and folks scramble for cover – so too is the move by more and more to get themselves under the protective cover of Uncle Sam’s TARP.
By Neil George
The Troubled Asset Relief Program so far has been one of the greatest giveaways in the history of government – and it’s far from running out of fabric.
Sure, you might say that the 700 billion bucks is the limit and that the initial payout of hundreds of billions has pretty much already been spent – but there’s a lot more still coming.
And no – I’m not talking about throwing cash away on a couple of car companies in
So far – under the TARP deals – the US Treasury has placed some 155 billion bucks with some 77 banks around the
That means that for thousands of public and thousands more of privately held banks – the TARP has yet to cover even a smidge of them during the current financial storm.
And guess what? These smaller banks have lobbyists. Go figure.
One of the groups that’s working deals now for TARP cash is the Independent Community Banks Association (ICBA). It’s rightfully arguing that with all of the heavy money going to the biggies of banks – that smaller banks are being put at an increasingly less competitive position.
And they’re also arguing that its been the smaller banks that have been left for dead not just by Treasury – but also by the FDIC that’s pretty much moved to seize and liquidate smaller banks as opposed to supporting deals for the failing bigger banks so far this year.
From an investor’s position – what I see continuing is that the TARP will continue to get bigger. With more cash continuing to flow to banks – not just at the top of the heap – but further down a few rungs of the ladder.
The cash of course isn’t going to be come from buying bad loans or poorly pooled bundles of loans – but rather in more and more preferred shares of stock in banks – from the large to the small.
This is of course thanks to a bit of editing in the TARP legislation. It seems that as many on Capitol Hill and at the White House were all about trying to keep bank executive compensation better under control for political points with voters – they also had to listen to lobby groups – including the much bigger banking group – the
While many assumed that when banks took TARP cash – that they would be limited as to what and how much that they pay senior executives. But the reality in just a couple of sentences put into the TARP is that if banks sell bad assets to the Treasury – then they come under rules of compensation. If they only sell preferred shares or other capital – then nothing is changed.
This is why all of the biggie and not so biggie banks were willing to accept TARP cash.
And why now – the smaller fry are also working to get theirs’.
This means if you want to continue to follow my direction to invest right along with Uncle Sam Inc – look at the preferred share market for banks.
There are plenty out there that pay in the upper single to low double digits – and they’re the same banks getting more Uncle Sam cash.
One in particular that’s a real deal is an old local
No common stock – all was bought back – only a few preferred shares – including the 8.15 percent trading on the NYSE (New York Stock Exchange) under the symbol FBS A.
Trading at a big discount to its call – it should be grabbed when you can.
Neil George is editor of By George.
The above is only opinion and does not represent and/or offer to buy or sell any security and/or any financial advice. The opinions contained may not be suitable for all investors who should consult their own financial adviser before making any investment or other decisions. I may own some of these same securities noted in accounts under my control or for my benefit.
Errors/Omissions: I always welcome being called on facts, figures and commentary from readers and look forward to your feedback. I can be reached by email at njgeorge@att.net or njgeorgejr@gmail.com or at 01-314-616-3325.
