Some Banks Are Rejecting Bailout Money
As a recent victim of the financial crisis, it would be easy to lump all bankers together as greedy evildoers, but that would be wrong. According to CNN Money, there are a growing number of banks refusing to take advantage of bailout money. According to the story,
“Cullen/Frost Bankers…announced Friday that it has decided to not ask for funding through…the Treasury Department’s Troubled Assets Relief Program.”
Why turn down free money, you might ask? Most likely, it was to distance themselves from the troublemakers and instill confidence in their financial stability. And it seems to be working. Cullen/Frost (CFR) stock is up a stunning 15.9% so far this year even as the rest of the financial sector continues to tank.
I think this is a positive development that will hopefully put pressure on other banks to take advantage of the Troubled Assets Relief Program (TARP) only if absolutely necessary. In a word of rampant greed in the financial system, we need good role models.
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The pressure on the banks that take the fed money to lend it out is what banks don’t like. There are so many better investment opportunities for banks right now, that they don’t want to lend to people at low interest rates.
Why lend someone a 6% loan to purshase a car or house, when you can buy up assets like commercial real-estate or a competing bank for 20 cents on the dollar?
The Fed is not happy with banks who are choosing to use their money to for better investments rather then lending the money to people, because consumer confidence has tanked and without money – the economy will continue to decline. The fed is fighting against market forces.