CEO Who Returned Funds Notes TARP's Stigma

Joseph DePaolo i i

Signature Bank President and CEO Joseph DePaolo. Courtesy of Signature Bank hide caption

itoggle caption Courtesy of Signature Bank
Joseph DePaolo

Signature Bank President and CEO Joseph DePaolo.

Courtesy of Signature Bank

New York-based Signature Bank has returned $120 million it got through an emergency infusion to banks from the Treasury Department designed to stimulate new lending.

It's one of four regional banks around the country that have become the first to return money from the Troubled Asset Relief Program.

Joseph DePaolo, Signature Bank's president and CEO, says the bank was invited to participate in October by the Federal Deposit Insurance Corp. He says the bank didn't need the money from TARP's Capital Purchase Program at the time, but officials felt they should take it.

"The perception was if you did not take it, then you were not considered a well-capitalized, healthy institution," DePaolo tells NPR's Melissa Block, "coupled with the fact that when your federal primary regulator calls you up and invites you to participate, you normally don't want to turn that down."

DePaolo says, however, that the perception about banks that received TARP funds has changed since then, and he blames Congress for the shift.

"I believe it's Congress' fault for allowing it to go from a program for healthy institutions to a program that they're giving money to weak institutions and that we're evil," he says. "And I'm not blaming the Fed and I'm not blaming the Treasury. I just believe that it became something political."

DePaolo says Signature returned the money for three reasons: Legislation passed Feb. 17 would limit the compensation for salespeople, make it difficult to recruit bankers and cause uncertainty.

"With the new legislation, they changed the rules in the middle of the game," he says. "We didn't know how many more rule changes or legislation would come down, maybe telling banks, 'This is what you can do with your lending. This is what you can do with your clients.'"

He says the TARP money also brands a bank with a "scarlet letter."

"I feel sometimes like Darth Vader, like I came from the dark side," DePaolo says. "And that's not how you want to feel."

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