Last month, Iberiabank became the first bank to return TARP money. Now other healthy banks are lashing out against a system that they increasingly see as rewarding reckless competitors while hampering their own business. Warren Buffett said last week that the dynamic was making it better to be a financial cripple than a healthy financial institution.
“I’m kind of bitter,” William Cooper, chief executive officer of the 448-branch Minnesota based bank TCF Financial, tells Bloomberg. “We pay for the excesses of our competitor over and over again.”
The immediate cause of Cooper’s bitterness is the threat of higher FDIC fees to pay for failed banks. TCF has invested about $1 billion FDIC deposit insurance over the years.
Community lenders “are feeling like they are paying for the incompetence and greed of Wall Street,” says Camden Fine, the president of the Independent Community Bankers Association.
Josh Brown, who blogs as The Reformed Broker, points out that Iberiabank seems to be tired of being lumped in with the financial failures:
Where is the pride among the community bankers who had avoided the sub prime gold rush and have treated their balance sheets like they gave a damn?
Apparently, the pride is in Lafayette, Louisiana, the home of Iberiabank Corporation. Iberiabank (IBKC) has become the first financial institution out of over 440 to return TARP funds back to the federal government. Iberiabank basically said, “Look, you told us all to participate and take the money, and now we are looked at and treated like common criminals because we did so.”
IBKC has filed to return the original $90 million plus accrued interest back to the TARP and could be the leaders of a bank backlash.
“We believe recent actions, interpretations, and commentary regarding various aspects of the program places our company at an unacceptable competitive disadvantage,” said Daryl Byrd, CEO Iberiabank.
“IBKC actually returned the TARP money a couple of weeks ago now, at the end of February,” Sam Jones of FT Alphaville asks. “Which has us wondering whether any other tarpees has sent back the cash too in the meantime?”
We haven’t seen any more reports of banks returning TARP funds yet. Any one else?