MELISSA BLOCK, Host:
Joseph DePaolo is the CEO of Signature Bank in New York, which is returning the $120 million it got, plus five percent interest. Why?
JOSEPH DEPAOLO: Because things have changed. When we first took the funds, we did not need them. We actually raised 150 million of our own common equity in September. In October, we received a phone call from the FDIC, which is our primary federal regulator, inviting us to participate. And at the time, we felt that the capital purchase program under TARP was supposed to be for well-capitalized, healthy, strong financial institutions. So that these healthy institutions like Signature Bank, could actually continue to lend or buy banks that are in weak positions.
BLOCK: Now, you said you didn't need the money at the time.
DEPAOLO: Right.
BLOCK: So why did you take it?
DEPAOLO: Well, because we thought that the perception was if you did not take it, then you were not considered a well-capitalized healthy institution. 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.
BLOCK: Okay, and you're saying now the terrain has changed. How has it changed?
DEPAOLO: Well, it went from giving the money to healthy institutions and of that being the perception, changing it to a stigma of banks who receive the money, are somewhat considered evil because they are not healthy.
BLOCK: How are you seeing this, what you call stigma, playing out in real terms? And what are the actual ramifications, do you think?
DEPAOLO: Well, the stigma is there is a backlash from lawmakers. They're constantly trashing banks. And they're really stirring up the pot of Americans. And we were getting a lot of feedback from our clients that if you don't need the money, why put yourself through that stigma and backlash of both lawmakers and ordinary citizens?
BLOCK: So that's the main reason you wanted to give the money back.
DEPAOLO: So when you add those three, along with the fact that now you have a scarlet letter on your chest, because you're a bank that has TARP funds, it made no sense.
BLOCK: What do you think happens, Mr. DePaolo, if you give this money back, if other healthier banks start returning TARP money early, doesn't that raise the stigma level that you're talking about for the banks that have kept the money? Doesn't that perpetuate the problem you're talking about?
DEPAOLO: Yes, I think that there will be somewhat of a stigma. And that's one of the reasons why we wanted to be one of the first to return the money. It may be an unfair stigma, but it's something that all the banks need to deal with.
BLOCK: What would you say your message is to Treasury and the Fed, if they were talking to you right now, as to the success and sort of the model of the TARP program and how it's working?
DEPAOLO: I believe that their initial plan was very good. And they were swayed by some politics. And then that politics swayed because of public sentiment. They're continuing to talk about how evil - I feel sometimes like Darth Vader, like I came from the Dark Side, and that's not how you want to feel. Look, we were trying to do the right thing for the country. And I'm not blaming the Fed, and I'm not blaming the Treasury, I just believe it became something political.
BLOCK: Well, Mr. DePaolo, thanks for talking with us today.
DEPAOLO: Oh, Melissa, I do appreciate the time you're giving us.
BLOCK: Joseph DePaolo is the CEO of Signature Bank in New York, which has just returned $120 million of TARP money to the Treasury Department.
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