Where Will TARP Money Go? Let’s Start in Hartford

Secretary Geithner and President Obama today hailed the repayment of $68 billion in TARP funds as a clear indication of the success of the overall financial recovery programs implemented by the administration. Well, as those familiar with the “shell game” know, in order to keep the game going, it is critically important to display some winners on a regular basis.

How do we know that the TARP funds were utilized properly and everybody won on this government investment? We don’t, despite what Barack says. Money is fungible. The system was saved, with no small thanks to the FASB’s relaxation of the mark to market. These TARP recipients are designated as the winners. Meanwhile the system still has upwards of $500 million -1.25 billion in embedded losses, depending on whose projection you would like to use.

In my opinion, I believe Barack and team would have preferred to keep the TARP funds within these financial institutions. That said, there are other factors at work here. What are they?

1. when the TARP legislation was passed last Fall during the Bush administration, it set specific ground rules necessary for repayment. Barack, Tim, and team would have run the risk of flouting that legislation if they did not allow some firms to repay.

2. the administration will still be able to wield significant influence over these firms via a number of other Fed backstops already in place.

3. not being widely publicized but of very real significance, the administration will need these funds in other firms. What firms? Let’s drive on over to Hartford.

As the WSJ recently revealed, Hartford Chief Expects TARP Funds Soon:

It is expected in the next few weeks to get as much as $3.4 billion in funds under the Treasury’s Capital Purchase Program.

Hartford’s stock was down today as it is being downgraded by equity analysts at Citigroup due to management issues.

Recall that Hartford (HIG) was one of 6 insurance companies that received thrift status by acquiring a controlling stake in a small institution. As such, these firms became eligible for TARP funds. In my opinion, once the TARP dam is broken with one insurance company, the stigma is lessened for others to acquiesce in accepting these funds.

What might be the next stop after Hartford? Perhaps Newark (Prudential Insurance) or Philadelphia (Lincoln Financial). Sense on Cents will monitor where the TARP train moves next.

About Larry Doyle 522 Articles

Larry Doyle embarked on his Wall Street career in 1983 as a mortgage-backed securities trader for The First Boston Corporation. He was involved in the growth and development of the secondary mortgage market from its near infancy.

After close to 7 years at First Boston, Larry joined Bear Stearns in early 1990 as a mortgage trader. In 1993, Larry was named a Senior Managing Director at the firm. He left Bear to join Union Bank of Switzerland in late 1996 as Head of Mortgage Trading.

In 1998, after 15 years of trading and precipitated by Swiss Bank’s takeover of UBS, Larry moved from trading to sales as a senior salesperson at Bank of America. His move into sales led him to the role as National Sales Manager for Securitized Products at JP Morgan Chase in 2000. He was integrally involved in developing the department, hiring 40 salespeople, and generating $300 million in sales revenue. He left JP Morgan in 2006.

Throughout his career, Larry eagerly engaged clients and colleagues. He has mentored dozens of junior colleagues, recruited at a number of colleges and universities, and interviewed hundreds. He has also had extensive public speaking experience. Additionally, Larry served as Chair of the Mortgage Trading Committee for the Public Securities Association (PSA) in the mid-90s.

Larry graduated Cum Laude, Phi Beta Kappa in 1983 from the College of the Holy Cross.

Visit: Sense On Cents

Be the first to comment

Leave a Reply

Your email address will not be published.