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VOL. 125 | NO. 5 | Friday, January 8, 2010

TARP paybacks spell end for Wall Street, Washington marriage

By Andy Meek

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Top 10 Memphis-area Banks, by Market Share

First Tennessee Bank NA ........ 34.03 %
Regions Bank ........ 16.10%
SunTrust Bank ........ 8.54%
Bank of America NA ........ 4.07%
BancorpSouth Bank ........ 3.93%
Independent Bank ........ 2.62%
Trustmark National Bank ........ 2.15%
Renasant Bank ........ 2.05%
Bank of Bartlett ........ 1.59%
Trust One Bank ........ 1.56%

Source: Federal Deposit Insurance Corp., current as of June 30, 2009


About 230 miles separate the centers of political and financial power in the United States.

But in 2010, Wall Street and Washington will remain as interlocked as they’ve been for the past two years, ever since the federal government first began using the public credit card to shore up the wobbly financial marketplace.

Many banks – including some in Memphis – are still piling sandbags to stem the tide against the effects of the housing bust, whose ugly stretch marks remain plainly visible. At the same time, a raft of new legislation is in the works that would enmesh Washington even deeper into all aspects of banking, from decisions on executive pay to new consumer protections.

Some banks in the Memphis area are still holding on to the emergency money they got starting in late 2008 as part of the most controversial and far-reaching aspect of Wall Street’s arranged marriage with the federal government. That capital was given in exchange for preferred shares in hundreds of banks around the country as part of the industry’s $700 billion rescue package.

A few local banks have started sending the money back, and others are expected to do so over the course of the year, a sign the industry is beginning to pick itself back up from the recession’s bruising body blow.

HISTORIC SIGNIFICANCE: The historic Bank Tennessee building at 30 N. Second St. was once the site of Memphis’ first full-service radio station, WMC Radio, and The Commercial Appeal. The station broadcast 24-hour information for flood victims and steamboats during the Mississippi River floods of 1927 and 1937. -- PHOTO BY LANCE MURPHEY

Magna Bank, the third-largest Memphis-based bank ranked by assets, paid back 25 percent of its $14 million Troubled Asset Relief Program (TARP) investment in the fourth quarter. Kirk Bailey, Magna’s chairman, president and CEO, said the bank would pay back additional chunks over time as the economy improves.

“We had an interesting discussion with the regulators about that. They said, ‘You’re the first one that’s wanted to do this in the Southeast U.S.,’” Bailey said. “They didn’t have any problem with it, it was just procedurally different for them, because everyone else has been paying it all off (at one time).

“It’s all about your capital ratios, and ours are strong. We took the TARP money as insurance. And because we view it as insurance and because we think the economy is gradually getting better, we think the thing to do is gradually pay the insurance back.”

The U.S. Treasury closed the door on that piece of TARP at the end of December, meaning no more banks will be recapitalized beyond the 707 banks that got $204.9 billion. With approval from their regulators, the heads of those banks will decide when the time is right for them to return their portions of the taxpayer-funded aid.

Iberiabank Corp., a Louisiana-based banking company with branches in Memphis, paid back its $90 million in TARP funds in early 2009. Another local institution, Jackson, Miss.-based Trustmark Corp., got out from under the government’s wing a few weeks ago by sending back its $215 million TARP investment.

Memphis-based First Horizon National Corp., the parent company of First Tennessee Bank, is still sitting on $866 million in TARP aid, though some analysts predict FHN will pay it back in 2010. So is the Bank of Fayette County, the holding company of which got a little more than $6 million in TARP money.

Other local TARP recipients include Germantown Capital Corp., Tri-State Bank of Memphis and First Alliance Bank, among others.

RECORD TOTALS DAY WEEK YEAR
PROPERTY SALES 64 87 1,429
MORTGAGES 39 60 1,107
FORECLOSURE NOTICES 0 6 196
BUILDING PERMITS 92 209 3,265
BANKRUPTCIES 42 84 837
BUSINESS LICENSES 21 23 352
UTILITY CONNECTIONS 0 0 0
MARRIAGE LICENSES 0 0 0