TAG Bill Clears Key Senate Hurdle as White House Voices Support
American Banker

(12-11-12) The Obama administration released a statement of policy Tuesday in support of extending a crisis-era guarantee program for certain business bank accounts, ahead of a successful procedural Senate vote on the bill to limit debate on the issue. The bill, S. 3637, introduced by Majority Leader Harry Reid, would extend the Transaction Account Guarantee program for two years. The issue has divided a number of industry groups, pitting big banks and credit unions against smaller banks which argue they still need the guarantee. "The Transaction Account Guarantee (TAG) Program played an important role in maintaining financial stability and banking system liquidity for consumers and businesses during the financial crisis," said the statement of policy. "While the Administration supports a temporary extension of the program, it remains committed to actively evaluating the use of this emergency measure created during extraordinary times and a responsible approach to winding down the program." The Senate voted 76 to 20 in favor of a motion to limit debate on the issue on Tuesday afternoon, which likely clears the path for an additional procedural vote and a final Senate vote in favor of the bill as early as Thursday.

(12-11-12) A bank's decision to balk at paying dividends to a private investor that bought its Troubled Asset Relief Program (TARP) shares may reduce investor interest in future auctions and weaken returns for the government. Basswood Capital Management won a Treasury bid in October to buy a portion of preferred TARP shares of $114 million-asset CenterBank in Milford, Ohio. Although the bank had never missed a dividend payment to Treasury and appeared in healthy condition, the financial institution sent a letter Nov. 13 to Basswood Capital saying it would not pay its quarterly dividend. The move caught the investment firm by surprise, especially when the bank's CEO gave his reasoning to a local paper, telling a reporter that the bank simply wanted to "keep our capital local as opposed to sending it to New York." The bank's decision is likely to have far-reaching consequences, however, including potentially spooking other investors away from future Treasury auctions and reducing the government's return. "It will open the eyes to some investors that the dividend deferral feature is not merely a theoretical possibility," said Kip Weissman, a partner at law firm Luse Gorman Pomerenk & Schick. "It will probably depress prices."

(12-7-12) At 9 a.m. on Nov. 30, the Treasury Department began auctioning off its shares in seven community banks scattered across the country. Each of these institutions had taken money from the government in 2009 during the financial crisis. By the time the bidding closed at 6 p.m. Monday, the Treasury had collected about $62 million. However, the government’s original investment in these banks totaled $75 million. It was not the first time the government walked away with a loss. In 10 similar auctions conducted to date, Treasury has sold off its investments in 84 financial firms, accepting losses of about $241 million. “Treasury has shifted its emphasis and is no longer focused on promoting financial stability,” said Christy Romero, special inspector general for the TARP. “Instead, Treasury wants to declare success and move on.” Treasury officials said the bids the department has received reflect what the market is willing to bear at this point. Besides, they said, the ultimate goal is to wind down TARP in an efficient way. Moreover, the government may have sold shares in these community banks at a loss, but these firms also paid $307 million in dividends to Treasury coffers, aside from the money recouped from the auctions. Overall, Treasury has turned a profit from its small-bank investment. “We want a competitive, transparent process, and that’s exactly what we’ve had with the auctions,” Treasury Assistant Secretary Timothy G. Massad said.