Hundreds of banks have received capital infusions from the Treasury Department's Troubled Asset Relief Program, but between restrictions on executive pay and politicians trying to micromanage TARP recipients' every move, some have concluded that participating in the program is more trouble than it is worth.
Several regional banking companies, including Iberiabank Corp. and TCF Financial Corp., say they are returning the funds because the heightened scrutiny has put them at a competitive disadvantage. Northern Trust Bank, under fire for its sponsorship of a professional golf tournament, would rather give back the $1.6 billion it received than be told how it can spend its marketing dollars.
Is this what policymakers want? The TARP's Capital Purchase Program was created to stimulate lending and that effort is undermined when healthy banks start returning the money.
But knocking banks is in fashion, and even conservative, well-run ones like Northern Trust have become punching bags.
The tournament at the Riviera Country Club near Los Angeles has been a premier event on the PGA tour for decades, and in 2007 Northern Trust signed a five-year deal to be its title sponsor. After the event's conclusion in February, it received a letter from House Democrats demanding that it repay the government the equivalent of what it "frittered away" entertaining clients and employees at tournament-related functions. Then Sen. John Kerry introduced legislation that would prohibit any TARP recipient from hosting parties and other events.
Grandstanding politicians apparently failed to consider the impact of Northern Trust's commitment on the local economy. In 2003, the event generated roughly $30 million of economic activity in the Los Angeles area, according to a report from UCLA's Anderson School of Management. Those are the most recent numbers available, but it's a good bet that it brought in at least that much this year. After covering its costs, Northern Trust also donates all proceeds from the event to local charities. Last year its contribution was $1.1 million.
Still, none of that seems to matter in the politics of the moment. After the Northern Trust flap, Morgan Stanley canceled all client events at a PGA tournament it is sponsoring in Dublin, Ohio, in June.
That might cheer policymakers, but it's bad news for local hotels, restaurants and catering firms, which might soon be asking for a bailout of their own.
