ROBERT SIEGEL, host:
This is ALL THINGS CONSIDERED from NPR News. I'm Robert Siegel.
President Obama met at the White House today with the CEOs of several of the nation's biggest banks and financial institutions: JP Morgan Chase, American Express, Freddie Mac, among many others. The White House said he intended to urge everyone to look beyond our own short-term interests to the wider set of obligations we have to each other in order for America to succeed. Well, here's an increasingly popular short-term interest among banks that took money from the government's Troubled Asset Relief Program, the TARP: they want to give it back. Reporter Saskia Scholtes of the Financial Times wrote this week about the race to pay back the government, and she joins us from New York. Welcome back to the program.
Ms. SASKIA SCHOLTES (Reporter, Financial Times): Thank you.
SIEGEL: How is it that, suddenly, dollars from the Treasury are what everyone wants to get rid off?
Ms. SCHOLTES: Well, the dollars have come with a lot of strings attached. Not least those on executive compensation, which began with the CEO and then the top five lieutenants at the bank, and then stretched to the top 20 lieutenants. And now, we have this issue of whether bonuses are going to be taxed at 90 percent, and that was passed in the House last week. The Senate is looking at a similar proposal.
Heads look like they may be beginning to cool, but it's still a big worry about whether you can pay talent and keep the TARP money.
SIEGEL: Yeah. I saw an item on the news wires today from Shore Bancshares, which got $25 million from the TARP, wants to give it back. They say it's no longer the program they signed up for, which they thought was for healthy institutions. Sound familiar to you?
Ms. SCHOLTES: That's very familiar. And actually, there are a lot of small banks, like Shore Bancshares, that has put in their formal applications to return the money: Bank of Marin, Bancorp, Iberia Bank, Signature Bank, the list goes on. It's about, only amounts to about 700 or so million dollars at the moment, combined of money that has formally applied to return.
But for the most part, the explanations are the same: the terms have changed, we need to be able to compensate our teams of people, our business model was built on it, and we thought this was the healthy banks and we're doing just fine, thank you very much.
SIEGEL: You wrote about the case of Northern Trust, which evidently wants to give back the TARP money it received.
Ms. SCHOLTES: Mm-hmm, yes. Northern Trust got a lot of heat from the media, amongst others, for hosting a series of sponsored golf tournaments and tennis tournaments and that sort of thing, whilst also receiving government money, and it became quite scandalous. And Northern Trust is a pretty profitable institution, hasn't had too many troubles, and they don't see any reason to keep money that is causing them all this trouble.
SIEGEL: Now, I want you to explain a word here. You say that these institutions are applying to return their money to the Treasury. It's an odd kind of loan where you have to ask may I now pay you back.
Ms. SCHOLTES: Well, that's true. But remember that the initial purpose of the TARP money was to make sure that all banks were well capitalized, and that even healthy banks would have money to lend out to consumers, like you and me. So in order to return the money, the Treasury and the regulators want to be absolutely certain that the banks involved are well capitalized and can continue to make loans to people, like you and me, and are not going to otherwise constrain their lending activities simply because they want to take their bonus money.
SIEGEL: You reported that Bank of America, a big recipient here, is interested in giving back the money as soon as it's practical. What does that mean, as soon as it's practical?
Ms. SCHOLTES: Well, the first step is they have to pass the stress test. And so the earliest that they'd be able to pay back the money, provided they get approval and they pass the stress test, would be late April. The approval may take a little longer - remember that Bank of America is in the process of digesting its acquisition of Merrill Lynch. And so the regulators may feel that there are more capital hits to come out of the woodwork.
But in terms of the sort of realistic timeline for an approval, it would be no sooner than late April.
SIEGEL: It seems to be something paradoxical here, that if I'm a big bank and I've got $10 billion from the Treasury, that's supposed to shore me up and make me healthier. But if it implies to everybody else that I'm not healthy, then it's undoing the very job it's been sent there to do.
Ms. SCHOLTES: Well, the initial idea behind the TARP was that all banks, including healthy banks, would have to take it so that there wouldn't be any stigma attached with having the TARP money. And now, we're seeing that logic in reverse, whereby everyone wants to rush to say, I can pay it back now.
You know, the regulators are going to have to sort the wheat from the chaff here. And eventually, there will be some who pay it back and look good, and some who are unable to pay it back and will be punished in the process.
SIEGEL: Reporter Saskia Scholtes of the Financial Times, thanks for talking with us.
Ms. SCHOLTES: Thank you so much.
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