TCF bank pays off TARP, pays extra to dump Treasury control
posted at 2:13 pm on April 24, 2009 by Ed Morrissey
Local banker Bill Cooper, who runs TCF Bank in the Twin Cities, has established himself as a tough-as-nails businessman and has won the admiration of many in this area. Today’s announcement exemplifies why. Cooper has repaid the TARP funds in order to get Treasury off his back, even though he had to pay a premium to do so:
TCF Financial Corporation announced Wednesday that it had completed the repurchase of its TARP preferred stock from the U.S. Treasury. It paid a redemption price of $361.2 million plus accrued dividends of $3.4 million.
TCF Chairman and CEO William A. Cooper said the bank had maintained a strong capital position over the last year through its own operations, and it didn’t need to rely on the public capital infusion to continue its traditional lending pace. Cooper said TCF is the largest bank to pay back TARP funds to the U.S. Treasury.
But that didn’t come without Treasury getting one last shot at dictating business terms to Cooper:
As part of the agreement for withdrawing from the program, TCF also agreed to reduce its first-quarter dividend from 25 cents to 5 cents.
In other words, Treasury just cut 80% of the revenue for the stockholders as a penalty for early repayment of the TARP funds. Does that make sense to anyone else? Shouldn’t Treasury reward fiscal responsibility in its banks by allowing owners (stockholders) to realize their profit? King Banaian calls it a “ransom”:
Contemplate that last sentence: The government required TCF to drop its dividend in order to repay its loan. Would a bank be allowed to make you drop your kid’s allowance from $5 a week to $1 before you could pay off the auto loan early? Banks in trouble often end up in agreements with the Fed that include seeking permission to pay any dividends, but banks were brought into TARP as a matter of solidarity, even patriotism. Solidarity isn’t free, I guess.
How many pints of blood will be taken from the others?
It shows pretty clearly that at least a good part of the motivation behind TARP liquidity injections was to gain control of bank operations, and not just to rescue the banking sector. Forcing Cooper and TCF stockholders to pay a ransom in order to get their bank back is counterintuitive under any other scenario.
Still, I’m betting that Cooper is happy to pay it off in order to get the Treasury out of his affairs. I wonder how many others Cooper will inspire to force Treasury to accept repayment of TARP funds?