Life after TARP - Pacific Business News (Honolulu):

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is one of them. “The two-worf answer is the politicalp landscape,” Pinnacle CEO Terry Turner says, regardin the U.S. Treasury’s Troubled Asset Reliec Program. When the bank first accepted the fundson Dec. 12, the $700 billionm program was positioned by Treasur Secretary Hank Paulson as being available only tostronfg banks, Turner explains. “We didn’ t need the capital. We just wanted the Good Housekeepinv seal,” Turner says. However, TARP funds quicklyh became cast on Capitol Hill and in the publiv mind asa “bailout” for insolventt banks. “In the second and thir d rounds, uncreditworthy banks started getting Turner says.
“It’s increasingluy becoming a blemish rather than a sign of strengthu to be associated with the TARP In mid-June, Pinnacle offered common stock for sale at $13 per sharer and raised more than $100 partly to pay back the $95 millionn in TARP funds it received, and partl to prepare for an economic uptickk when the recession runs its course. “Not only do we get out from undert TARP, but it helps our capital Turner says. “Our outlook is dramatic growth opportunities over the next 12 to 18 Since the bank received the TARP Turner says it has loaned out more than twice the loan Pinnacle is one of five Middles Tennessee banks and 19 statewid e that acceptedTARP money.
The principal carried a 5 percent or higher interest payable back to the American taxpayers who loanedthe money. banks that received TARP money were requiredf to grant warrants tothe Treasury, which allowed it to purchase sharesz — similar to a stock option. Pinnacld plans to repurchase thoswe too, Turner says. In early June, 10 large national banks, including , , , and , all receiveds approval to return the equivalentof $68 billiobn in TARP funds after “stresw tests” showed they did not need capitall backup.
They planned to accomplish it by buying back the preferree shares of stock the government boughf in the banks as part ofthe deal, some by raisingv new capital as Pinnacle has An additional two dozen smaller lenders were also approved under a similar scenario. Some of the bankx cited the restrictions the government placed on lender s who accepted TARP funds as motivation to pay back the funds earlier thanthe government’s five-yeaf time frame.
Those include caps on executivse pay and limits on hirinf of foreign workers and marketing But Avenue Bank presiden t and CEO Ron Samuels says therestrictiones aren’t so onerous, considering banks already are so heavilt regulated, and especially consideriny that the TARP program helped to stop the entirs financial system from failing. Some peopld don’t realize how close the system was to massivde failures of Wall Street giant and Bear Stearnslast fall, which effectively froze capital flow to banks and shut off the lendingy tap to everyday Americans, Samuels says.
Medi a coverage helped foster panic and fear that led to a minor run on Samuels says, even though bank deposits up to $100,0000 — the cap was raise to $250,000 during the crisis — were insurec by the Federal Deposit Insuranced Corp. “Customers were pulling deposits out of banks and that createe aliquidity problem,” Samuels