The Federal Open Market Committee (FOMC) meets today. Those folks are the ‘deciders’ when it comes to monetary policy. This should be an interesting meeting for a number of reasons. First, new regulations proposed by the Obama administration definitely put the Fed in the catbird seat. Second, Bernanke is coming close to his expiration date. Third, a number of prominent economists are wondering about the Fed’s exist strategy from the current wide open floodgates and the pressure is on not to enable another bubble. Fourth, we find that three banks have suspended their Tarp Dividends meaning that all is not happiness and light in bank balance sheet land. The intrigue of all this pulls this financial economist away from her research agenda which is not good for my CV but very good for turning the dismal science into a Walter Winchellesque moment. Now, just where to begin …
‘Good Morning, Mr. and Mrs. North and South America and all the ships at sea…let’s go to press!’
Let’s go to Banking. Headline: The Scam Continues on you, Mr and Mrs. North and South America. Let’s dish the dirt on those banks that are behind in their loan payments to the U.S. taxpayer as reported today by the WSJ who keeps track of that sort’ve thing. It seems three banks have suspended their TARP ‘dividends’. They can miss six before they technically default. (Ask yourselves, if I missed five housepayments would I still be IN my house or out in the street by number six?) The banks are: Pacific Capital Bancorp (CA), Seacost Banking Corp of Florida (FL), and Midwest Bank Holdings Inc (IL).
Treasury spokeswoman Meg Reilly said Monday that “a number of banks” that got taxpayer-funded capital under TARP are no longer paying dividends to the government. “Treasury respects the contractual rights of [TARP recipients] to make decisions about dividend distributions, and that banks are best positioned to decide how to manage their own capital base.”
The moves are a sign of the deepening misery for large swaths of the U.S. banking industry, suffering under bad loans and the recession even as large firms such as J.P. Morgan Chase & Co. and Goldman Sachs Group Inc. rebound from the crisis, including by repaying their TARP funds last week. The halted dividends also raise questions about the Treasury’s assertions that the capital infusions represented sound taxpayer investments because they were only going to healthy institutions.
“Here the government has given the banks money at great terms, but the fact that they can’t keep up with it is worrisome,” said Michael Shemi, an investor at New York hedge-fund firm Christofferson, Robb & Co. “It tells you of the deep problems of community and regional banks.”