Repaying TARP for a Return to Gluttony

Wall Street Pigs at the Trough

I challenge you to find an article about the major banks wishing to repay TARP that doesn’t blatantly cite compensation as the banks primary motivation.

Here’s a taste from Dealbook (NYT):
Goldman Sachs, Morgan Stanley and JPMorgan Chase have said for weeks that they want to repay their share of the $700 billion government bailout so they can operate free of federal limits on executive pay.

When Lehman collapsed, the Fed and Treasury, right or wrong, saved each and every one of these institutions whether they will admit to it or not.  Goldman was dropping 20% a day, Morgan Stanley plunged under 10 bucks a share and could’ve been blown over by a feather.  The shorts owned these equities and by extension, the entire franchises.  Perception becomes reality very quickly and if your stock was percieved to have bankruptcy risk, then your trading partners were out the door and so was your business.  People were pulling money out of the bonds, shares, and even their accounts with these firms.  Just a whisper of insolvency was enough to take JPMorgan into the mid-teens, on it’s way to single digit-ville.

You can argue with me if you want, but I was there and I watched it happen.  And it was f&ckin’ sick.  And the government took action which brought us back from the brink, whether you approved of their methods or not.

The issue of repaying TARP money is a sensitive one for the government. By allowing strong banks to abandon the bailout and its restrictions, it risks putting weaker banks at a disadvantage, analysts say. A big concern is that high-level employees of bailed-out banks could defect to rivals that have paid back the funds.

Now many of the big banks are going to take the tack that they were forced to accept TARP funds to begin with, never really wanted them etc.  Not true.  GS and MS, investment banks/ brokerages for their entire existences, applied to become commercial bank holding companies just to qualify for the various rescue programs.  Morgan Stanley was under such pressure, they would’ve become a carwash if Paulson told them to.

And now that financing and credit markets have thawed enough for more traditional capital-raising, all of a sudden Uncle Sam is a burden because he won’t let the RESCUED executives light cigars with 1000 dollar bills again?  Cry me a river.

How about taking out a full page ad in every major newspaper in America to thank the folks in “flyover country” who were there for you when you bit off more than you could chew?  Instead of worrying about how you’re going to compete to stuff billions in each other’s pockets, why not take a breather and work patiently with the government who saved you just a few short months ago?

Full Story:  Goldman and Morgan Move to Repay TARP Funds

Full Disclosure:  I currently manage customer and personal accounts that are long Morgan Stanley and JP Morgan.  My commentary above is not an invitation to buy or sell any security, please see my Terms & Conditions page for a full disclaimer.

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