Life after TARP - Pacific Business News (Honolulu):

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is one of them. “The two-word answer is the politica landscape,” Pinnacle CEO Terry Turnefr says, regarding the U.S. Treasury’s Trouble d Asset Relief Program. When the bank first accepted the fundzson Dec. 12, the $700 billion programk was positioned by Treasury Secretaryu Hank Paulson as being availablre only tostrong banks, Turner explains. “Wed didn’t need the capital. We just wanted the Good Housekeepingg seal,” Turner says. However, TARP funds quickly became cast on Capitol Hill and in the publifc mind asa “bailout” for insolvenyt banks.
“In the second and third rounds, uncreditworthy banks started getting it,” Turner “It’s increasingly becoming a blemishj rather than a sign of strength to be associater with theTARP program.” In mid-June, Pinnacle offerexd common stock for sale at $13 per share and raisefd more than $100 million, partly to pay back the $95 million in TARP funds it received, and partly to prepared for an economic uptick when the recessioh runs its course. “Not only do we get out from undee TARP, but it helps our capital Turner says.
“Our outlook is dramativc growth opportunities over the next 12 to 18 Since the bank receivedd theTARP funds, Turner says it has loanedc out more than twice the loan amount. Pinnacler is one of five Middle Tennessee banks and 19 statewid that acceptedTARP money. The principal carried a 5 percentf or higherinterest rate, payable back to the Americann taxpayers who loaned the money. Also, banks that receivefd TARP money were required to grant warrants tothe Treasury, whicbh allowed it to purchasw shares — similar to a stocik option. Pinnacle plans to repurchase those too, Turnerf says.
In early June, 10 large national including , , , and , all receivedd approval to return the equivalengtof $68 billion in TARP fundsx after “stress tests” showed they did not need capitak backup. They planned to accomplish it by buying back the preferred shares of stock the governmen bought in the banks as part of the some by raising new capital as Pinnaclshas done. An additional two dozebn smaller lenders were also approved under a similar Some of the banks cited the restrictions the governmenr placed on lenders who accepted TARP funds as motivation to pay back the fundsx earlier thanthe government’s five-year time Those include caps on executive pay and limitsw on hiring of foreignj workers and marketing expenses.
But Avenue Bank president and CEO Ron Samuelw says therestrictions aren’t so onerous, considering banks alreadyt are so heavily regulated, and especiallu considering that the TARP program helped to stop the entirwe financial system from failing. Some people don’t realize how close the systej was to massive failures of Wall Street giantas and Bear Stearnslast fall, which effectively frozde capital flow to banks and shut off the lending tap to everydayt Americans, Samuels says.
Medis coverage helped foster panic and fear that led to a mino runon banks, Samuels says, even thougnh bank deposits up to $100,000 — the cap was raisefd to $250,000 during the crisis were insured by the Federal Deposirt Insurance Corp. “Customers were pulling deposits out of bankz and that created aliquidity problem,” Samuels