Since October of last year, 473 banks have been handed a large sum of taxpayer dollars in order to help keep them afloat. From the big banks to the little un-heard banks across the country, everyone is getting a little piece of the stimulus pie. This, we know. What we don't know is where is all the bailout or TARP money going and why are some banks still failing? Despite Bank of America and Citigroup's downward spiral, US Bancorp, more commonly known as US Bank, is actually doing fairly well.
The bank bailout, or TARP funds, intended to keep large banks afloat. Hoping that in turn, it would help the mortgage crisis so people could keep their homes. But then we started to hear about what the banks were really doing with all this money. The 130-year-old bank, Northern Trust received $1.6 billion in bailout money and spent it on a week long party in southern California. Bank of America sponsored a super bowl party and other bank executives took a weekend in Vegas. In attempts to end this unnecessary and unethical spending, President Obama put caps on their executive pay at $400,000, ($100,000 less than the president himself makes a year) and is closely monitoring the decisions they make.
The banks that have been accused of using bailout money on corporate parties deny that TARP was used for any of it. What these banks don't understand is, "if you accept money from the taxpayers, you shouldn't be seen having fun while the dollar bills are still stuffed in your pockets" said Michael Hiltzik, a columnist for the Los Angeles Times. The banks that have received the largest sum of money promise they are doing good things with it, "We are using the TARP funds to build our capital and make every good loan that we can," stated a representative of Bank of America.
JP Morgan Chase and Wells Fargo received some of the largest amounts of twenty five billion dollars each but haven't told the media exactly what it's going towards. Citigroup says it plans to do something positive with the money and appointed a committee to deal with how the TARP money will be spent but none of the plans they have released are concrete. Sarah Binder of The Brookings Institution agrees, "That's far, far too general to know what ... the banks are doing with the money." Ultimately, bailing out these banks is like adding to a black hole. Many economists agree that the only way to fix the bank problem is by waiting it out.
But instead of waiting, US Bancorp has taken the matter into their own hands and is actually doing fairly well. This is for a number of reasons but partly because they cut their dividend by 88% just a few days ago. US Bancorp is not the first bank to do this, they have joined with many U.S. lenders in doing so, but they all hope to preserve capital by reducing payouts. US Bank is also doing better than its rivals because, "its mix of businesses is less dependent on the health of the consumer." (money.cnn.com) Chief Executive of US Bank, Richard Davis, said there were many reasons for the dividend cut but US Bank should still perform "quite well" once it undergoes the "stress tests" by the government to test their strength during economic crises like the one we face today.
In most recent news, US Bancorp plans to give back the capital granted from the Treasury's Troubled Asset Relief Program, "as soon as prudently possible." US Bank spokesman, Steve Dale said that one reason for the dividend cut was that "it accelerates our company's ability to repay the $6.6 billion of TARP capital, something we intend to do as soon as possible with the approval of our regulators." Richard Davis, chairman, president and chief executive, stated that he is "not interested in additional government support."
Jeff Behn, branch manager at the US Bank located on Westlake Ave N in downtown Seattle, attributes US Bank's stability on their reluctance to give out loans the way other banks have in the past, "[US Bank] has been traditionally known for being a conservative lender…not getting involved with loans that make people go upside in their homes. Because of this, we are not in the same situation as the other banks." Behn believes that once all this "bank stuff" is over, US Bank will come out on top.