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Wednesday, February 18, 2009

Another Bank CEO Rips TARP

For all of you who think that the government should be able to dictate whatever they want to the banks who accepted TARP money, read this article about US Bancorp CEO Richard Davis. Davis is clearly frustrated by the government's doublespeak and decided to go public. (Wells Fargo's CEO had similar comments recently.)

There is no "A, R or P" in the government's Troubled Asset Relief Program, quipped U.S. Bancorp Chief Executive Richard Davis Tuesday morning in front of about 300 business people in Minneapolis. "It's just troubled," the 50-year-old CEO said at the Thrivent Financial for Lutherans' Business Leaders Forum.

"I will say this very bluntly: We were told to take it. Not asked, told. 'You will take it,' " Davis said. "It doesn't matter if you were there on the first night and you were told to sign on the dotted line before you walked out of the office, or whether in the days that followed, you were told to take it."

"We were told to take it so that we could help Darwin synthesize the weaker banks and acquire those and put them under different leadership," he said. "We are not even allowed to mention that. ... We were supposed to say the TARP money was used for lending."

But Davis is talking about it now, he says, because he and others oppose current and future strings attached to the program. Davis didn't detail those strings, but he said he and some peers intend to voice their opinions to Washington, D.C., soon.

"Now they're punishing you for having the capital," he said, adding that he refuses to stand by and let his company become "collateral damage" in an attempt to nationalize the banks.

This is exactly right. And unfortunately, many banks are now stuck in a self-fulfilling prophecy in which Obama's jawboning will eventually drive bank stocks to zero, which will then allow the government to take them over and dictate new lending terms and executive pay. If this weren't the case, Obama could issue a very simple statement such as, "some banks will fail, while others are very strong and will succeed. We do not want to take over the banking system." But there is a very good reason he doesn't do so - it's not true.