Banks Sped up TARP Repayment in Part to Pay Executives More
A report out on Friday from the overseer of the Troubled Asset Relief Program, which bailed out banks in 2008, says the banks sped up their repayment schedules, and the U.S. Treasury Department let them, because both sides just wanted to be done with the whole thing already -- with at least Bank of America admitting because they wanted to pay executives more. In the process, banks sold off assets and stock that may have left them vulnerable to another market fluctuation, the special investigator general for TARP found. According to the Associated Press report on the audit, both banks and regulators sidestepped the rule that they were supposed to gradually issue $1 in common stock for every $2 in TARP repayment, in order to shore them up financially, but only one bank, Citigroup, met that goal. The rest paid the money back at an accelerated rate, issuing stock to meet the market demand. Why such a rush. The AP spoke to the Bank of America spokesman:
Robert Stickler, a spokesman for Charlotte, North Carolina-based Bank of America, said the bank's wanting to issue stock "all at once rather than in stages was because of market conditions."
He rejected the idea that his bank might have pressured the regulators for a quicker exit. The bank's primary motivation was to remove the stigma of being a TARP recipient, Stickler said, and there also was concern that the restraints on executive pay were making it hard for them to keep executives.
