TARP Capital Investments Slow in Late March

The Treasury Department invested another $273.7 million through the Troubled Asset Relief Program from March 20 through March 27 after investing $1.7 billion in the first half of the month. The late-March investments, made through the capital purchase program (CPP), involved one publicly-traded firm and nine private financial institutions on March 20. Another 14 private firms participated a week later on March 27.

The smallest daily injection in late March — $442,000 — was given to Argonia, Kan.-based Farmers & Merchants Financial Corp. on March 20. The largest late-March daily injection — $70 million — was given to Glenwood Springs, Colo.-based Alpine Banks of Colorado on March 27. The only publicly-traded firm to participate in late March, Paso Robles, Calif.-based Heritage Oaks Bancorp (HEOP), received $21 million. The first New Mexico-based firm to participate in the CPP — Trinity Capital Corp. of Los Alamos, N.M. — received $35.5 million on March 27.

None of the 24 firms that participated in the CPP in late March received capital injections large enough to be subject to the strict compensation requirements that would go into effect if the Grayson-Himes pay-for-performance legislation that recently passed a House vote were to be enacted. Discover Financial Services (DFS) remains the only firm to have received a capital injection of more than $250 million — $1.22 billion — in all of March, qualifying it for the proposed restrictions. The others firms, according to language in the legislation, would be considered community banks and immune to the restrictions against paying its executives and employees “unreasonable or excessive” compensation or any bonus “not directly based on performance-based measures.”

All told, the Treasury had reported having distributed — or promised — $328.55 billion through different programs within the TARP as of April 2. After repayments of $353 million by five firms on March 31, total TARP funding was down $328.2 billion. It was still unclear how much funding remained in TARP at the time this story was published. The Treasury has come under fire lately for its lack of transparency in reporting details on TARP distribution.

As Congress moved on fiscal year 2010 budgets that eliminated a $250 billion reserve for future bank bailouts, the Treasury was reportedly busy moving funds around within the TARP to preserve as much leeway in the program as possible. The Wall Street Journal reported late last week that the Treasury cut its planned investment in the Term Asset-Backed Securities Loan Facility — or TALF — from $100 billion to $55 billion (although TARP transaction reports still listed the Treasury’s contribution at $20 billion on March 3). The Treasury has also scaled back its CPP from the original $250 billion to $218 billion, the Journal reported.

The March 2009 report on TARP by the U.S. Government Accountability Office found that remaining funds may actually be as low as $32.6 billion under the maximum allowance model, which calculates the CPP at $250 billion and TALF at $100 billion. The GAO report did, however, include a separate “projected use of funds” scenario that used the reduced amounts — $218 billion for CPP and $55 billion for TALF — that the Journal reported as the Treasury’s new program goals. Under this scenario, the program retains $109.6 billion.

The Congressional Budget Office‘s projection of the TARP’s ultimate cost to taxpayers rose 88 percent to $356 billion from an original estimate of $189 billion. The increased cost applies to TARP spending for fiscal years 209 and 2010, Reuters reporters noted in a weekend article.

Stocks purchased through the CPP had lost something on the order of $109.6 billion in value as of April 3, according to statistics released by business ethics think-tank Ethisphere Institute, which reports on the government’s loss-on-investment based on the idea that as stocks of publicly-traded TARP fund recipients lose value, so too does the government — and ultimately the taxpayer — lose a portion of the investment. The latest estimate shows a slight decline from recent reports, although Ethisphere pointed out the continued losses despite the market rally that began in early March.

American International Group Inc. (AIG), Citigroup Inc. (C) and Wells Fargo & Co. (WFC) were among Ethisphere’s worst-performing TARP participants, losing an estimated $30 billion, $24.4 billion and $2.5 billion, respectively. Morgan Stanley (MS), Goldman Sachs (GS) and BB&T Corp. (MSDXP) were among the best performers, gaining an estimated $3.2 billion, $577.6 million and $65.3 million, respectively.

Write to Diana Golobay at

Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.

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