Tuesday, December 02, 2008

TARP Money: Lend It If You Like

Hank Paulson was once a tree-hugger. In happier days, he served as Chairman of the Nature Conservancy, though you won’t find that in his official Treasury bio.

Now Hank is a bank-hugger. He gives banks a few million (or a few billion), they hand him some preferred stock, and off they trot. Maybe they lend the cash to credit-starved businesses and consumers, maybe they stick it in the office Secret Santa fund. Whatever.

The lucky recipients like to imply - but not promise - that they’ll use the money for loans. Take this artful sentence in yesterday's press release from Washington Banking, announcing Treasury's approval of $26 million in TARP funding:

Our ability to meet the needs of our customers and the communities we serve will be further strengthened by these funds.”

Very nice, but does this mean the bank plans to lend out its HankBucks? Dunno.

Perhaps I’ll send a loan application to Center Financial, which announced a $55 million commitment from the TARP last week. Center has big plans for its TARP take:

While increasing Center Bank’s lending capacity to continue supporting the financial needs of small and middle-market businesses in our communities, the additional capital will enhance the company’s liquidity and further our ability to capitalize on strategic opportunities.”

Sounds good, but does increased “lending capacity” equal more loans? Again, dunno. And how much of the $55 million will they spend on "strategic opportunities"? And what the heck do they mean by that, anyway?

As long as we're asking questions, here’s a musical one. You sing, I’ll play the harmonica:

How many bucks must banks get without strings
Before you call it a scam?

The answer, my friend, is...well, I think you know.

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