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.

Tags: , , , , , , ,

This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

Wealthcast Media, an affiliate of Ritholtz Wealth Management, receives payment from various entities for advertisements in affiliated podcasts, blogs and emails. Inclusion of such advertisements does not constitute or imply endorsement, sponsorship or recommendation thereof, or any affiliation therewith, by the Content Creator or by Ritholtz Wealth Management or any of its employees. Investments in securities involve the risk of loss. For additional advertisement disclaimers see here: https://www.ritholtzwealth.com/advertising-disclaimers

Please see disclosures here.

What's been said:

Discussions found on the web
  1. ex_wirehouse commented on May 19

    Great Piece, how much do you want to wager that if this mess is not over( and I feel that is a very real possibility) they come slinking back for another handout?

  2. ex_wirehouse commented on May 19

    Great Piece, how much do you want to wager that if this mess is not over( and I feel that is a very real possibility) they come slinking back for another handout?

  3. ex_wirehouse commented on May 19

    Great Piece, how much do you want to wager that if this mess is not over( and I feel that is a very real possibility) they come slinking back for another handout?

  4. Joshua M Brown commented on May 19

    its really unbelievable, pushing the gov to get out of the program that just rescued them is like suing the doctor who saved your life

  5. Joshua M Brown commented on May 19

    its really unbelievable, pushing the gov to get out of the program that just rescued them is like suing the doctor who saved your life

  6. Joshua M Brown commented on May 19

    its really unbelievable, pushing the gov to get out of the program that just rescued them is like suing the doctor who saved your life

  7. liquid spice commented on Sep 14

    … [Trackback]

    […] Info to that Topic: thereformedbroker.com/2009/05/19/repaying-tarp-for-a-return-to-gluttony/ […]

  8. immediate edge commented on Oct 01

    … [Trackback]

    […] Read More on on that Topic: thereformedbroker.com/2009/05/19/repaying-tarp-for-a-return-to-gluttony/ […]

  9. Hanföl commented on Nov 23

    … [Trackback]

    […] Info to that Topic: thereformedbroker.com/2009/05/19/repaying-tarp-for-a-return-to-gluttony/ […]

  10. Quality equation commented on Nov 24

    … [Trackback]

    […] Information on that Topic: thereformedbroker.com/2009/05/19/repaying-tarp-for-a-return-to-gluttony/ […]

  11. bmo bank online commented on Dec 06

    … [Trackback]

    […] Find More on to that Topic: thereformedbroker.com/2009/05/19/repaying-tarp-for-a-return-to-gluttony/ […]

  12. fake rolex commented on Dec 31

    … [Trackback]

    […] Read More Information here on that Topic: thereformedbroker.com/2009/05/19/repaying-tarp-for-a-return-to-gluttony/ […]