Are Banks Getting Strong-Armed Into Taking Government Cash?

Silly us. Here we thought that banks were all lining up, hat in hand in Washington to collect cash, regardless of whether they needed it or not. The sheer number of financial institutions lobbying to be included in the TARP, along with the sweetheart deals, seemed to suggest that the plan was distributing too much cash, to too many institutions that don’t need it. There’s a tilt, though. The American Bankers Association, a trade group, says banks don’t like being forced into getting a handout:

The American Bankers Association complained on Thursday that bankers around the country were “extremely upset” about how the Treasury Department was trying to offer them billions of dollars in fresh capital.

“These bankers believe they are being asked — in some cases pressured — to participate in a program they did not want and do not need,” wrote Edward L. Yingling, president of the American Bankers Association, in a blistering letter to the Treasury secretary, Henry M. Paulson Jr.

What’s wrong with these people? How can you run a bank if you’re allergic to cheap money. Not clear whether this is politics, or if something else is going on. We know that the government has forced banks that ostensibly didn’t want the cash to take it — by forcing it down their throats, that relieves some of the stigma of taking it. For banks then, eager to appear save, the best approach would be to “kick and scream” and claim you don’t want it, but end up taking it anyway, as part of some patriotic duty to be more stable — we’ve seen that several times.

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