Small TARP banks still unstable

[30ashopper]

The statistics, compiled by SNL Financial from U.S. Treasury data, showed 91 banks and thrifts skipped the May dividend payment under the Troubled Asset Relief Program, or TARP. It was the first missed payment for 23 of the banks; for the others, it was at least their second miss.

The number of banks missing their TARP payments rose for the third straight quarter. In February, 74 banks deferred their payments; 55 deferred last November.

SNL Financial's analysis found 20 banks have missed four or more payments since the program began in 2008, while eight banks have missed five payments.

Under the TARP program, the U.S. Treasury invested in preferred shares issued banks looking for funds. The banks were to make regular dividend payments to the Treasury, and have the right to repurchase the shares at some point in the future.

While many of the largest U.S. banks easily repaid billions in TARP aid, more than 600 smaller banks still hold $130 billion from the program, created at the height of the financial crisis.

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First I've heard about this. Either the smaller banks are defaulting because they know they can and nobody will care, or they are seriously hurting financially. I suppose it's reasonable to expect many more local bank failures over the next year or two, as individual and commercial real estate losses continue to mount.

 

[Lynnie]

I really don't see how a small regional bank (which is my personal banking preference) can compete in this environment with the massive, national banks. It's unfortunate, but I agree with you in that more smaller banks will fall into receivorship sooner than we think. That said, have you joined your local credit union, yet? Most are stronger than ever and generally offer better rates across the board on the banking platforms. ;-)