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May
Good For Them
I have been pretty much opposed to TARP (Troubled Asset Relief Program) from the start. I felt we were bailing out businesses that either had the capital to help themselves or needed to go through the bankruptcy process. However, TARP was the easy way out. With that said, I have to commend three banks. U.S. Bancorp, Capital One, and BB&T all plan to pay back the TARP money by selling stock and cutting dividends.
BB&T also said it will reduce its quarterly dividend 68 percent to 15 cents per share from 47 cents, saving $725 million a year, following 37 straight years of increases.
What a concept! How in the world should investors continue to see increased dividends when the bank in struggling? And I say that as an investor. When the companies I have invested in are struggling, I expect their stock price or dividends to decrease. In banks, a lot of investors have has this pollyanna view that dividends should continue to go up no matter how the company is doing.
In addition, the companies have come to realize that the TARP money comes with strings attached.
Hundreds of lenders took money from the program, which was designed to spur lending and improve the economy.
Yet many now view TARP as an albatross that imposes too many restrictions, including on executive pay, and suggests that recipients are desperate for capital.
“It creates excessive controls, it has a negative impact on our people and our strategies, (and) it runs a great risk of politicizing the lending process, which is very unhealthy,” BB&T Chief Executive Kelly King said on April 17.
These companies are still a long way from being prosperous, but I am glad to see they are paying back our money and trying to actually work through their problems on their own. I really think it will make them stronger and help them more in the long run. Hopefully they have actually seen and learned from their mistakes and their future policies will reflect this.
