TRAP Program

Anti-TARP Marketing: Fair Or Unfair?

In the Dallas/Fort Worth “Metroplex,” some banks are using the fact that they haven’t taken TARP money and their competitors have as fodder for Texas-sized sniping.

Rivalry between normally polite bankis getting down, dirty and very public with some using the government’s TARP program as a handy target.

Just ask Alan B. White, the entrepreneurial founder-president of Dallas-based PlainsCapital Bank, who is lashing back at competitors who slam his participation in the U.S. Treasury’s Troubled Asset Relief Program, aimed at jump-starting the economy. PlainsCapital received $87.6 million from TARP.

“I think it’s a cheap shot,” White said of a slew of barbed, anti-TARP ads, billboards and statements released by competitors, including Fort Worth-based Worthington National Bank and First Financial Bank of Abilene, which has branches in Southlake, Keller, Boyd, Decatur and Cleburne and owns Weatherford National Bank.

“Those ads are misleading,” he said. “I didn’t take the money for [a] bailout. I took it as an opportunity.”

Of course, one man’s “opportunity” is another man’s “sellout,” and in that dispute lies a plethora of snarkiness.

Anti-TARP billboards and newspaper ads for Worthington say, “Did your bank take a bailout? We didn’t,” and “Just say no to bailout banks. Bank responsibly.”

Worthington’s chief executive, Greg Morse, takes a different view than White.

“We don’t think that capitalizing on TARP funds is an opportunity,” Morse said by e-mail. “Opportunity should exist for the private sector with private money, not government funds. We are trying to be a leader in our industry, a leader in our community and a leader to our children.”

And the Worthington CEO defended his sniping ads and billboards by adding: “We think someone has to get the word out that solid and ethical banks exist.”

I have to admit to a healthy dose of skepticism that, given the general public’s current low opinion of the entire banking industry (parsing the nuances of blame not being the strong suit of Joe Six Pack), the average consumer will think that the refusal to take TARP funds will be considered equivalent to inclusion in the Sermon on the Mount (“Blessed are those who reject TARP, for they shall inherit the deposits of the faithful.”). On the other hand, judging by the few comments made to the story in the Fort Worth Star-Telegram, Mr. Morse may be on to something when it comes to denigrating his bank’s competitors.

As some of the commenters seemed to observe, there is a bit of irony in the fact that Mr. White promotes the fact that his bank got out of subprime mortgage lending in 2007 unscathed because the bank sold the loans to securitizers, who stuck asset-backed securities investors with the tab of any subsequent defaults. With newly issued TARP money, Mr. White’s bank is now prepared to issue $100 million of jumbo mortgages (above $417,000), which, he says, it wouldn’t be doing if it hadn’t received the TARP funds. Thus, those Dallas/Fort Worth fat cats who need to finance their McMansions will have a portfolio lender primed and ready to roll. No more dollars for poorer folk (the average price of a home in North Texas in December 2008 was $138,500), but plenty for the upper crust.

Legitimate or not, smart or not, bailing out on subprime lending after you’ve offloaded the risk to what is likely to be the US Treasury (since it will likely be buying and/or guaranteeing toxic subprime-backed securities), then taking TARP funds from the US Treasury that you don’t need in order to fund home loans to rich people, is what the casual uninformed observer might consider a circumstance that emits an odor akin to that given off by several dozen rotten eggs left in a burlap sack lying on a West Texas mall parking lot at high noon in August. I represent banks for a living, so I’d never, ever suggest any such thing. Still, I can see how and why those banks who aren’t taking TARP funds are making marketing hay out of this situation.

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