Burdened with increasingly onerous restrictions, some banks want to return federal bailout money.
Banks hoping to return bailout funds include Goldman Sachs, Wells Fargo, TCF Financial Corp., Northern Trust, and Signature Bank of New York.
That’s because the federal funds limit dividends, executive pay, employee conferences, and jobs for foreigners. Plus, Congress can add new restrictions to funds already doled out whenever it wants.
Probably the most dangerous requirement involves delaying foreclosures and modifying mortgages, banks say. Bank losses may grow when homeowners eventually default anyway despite rescue attempts.
The restrictions may make bailouts politically acceptable for Congress and the public, but critics say the government is using the bailout program to meet its social goals, an effort that may make weak banks even weaker as they make unsafe loans.
“I honestly believe the people in power pushing this policy see it as a win-win — as something that is good for the banking industry and good for homeowners and others,” Douglas J. Elliott, an economics fellow at the Brookings Institution and former investment banker, told The New York Times.
“But there is a slippery slope and there are potentially significant negative consequences.”
Some healthy community banks took federal money to increase local lending, not because they needed it, says MidSouth Bank President and CEO Rusty Cloutier, who may return $20 million.
“They're talking about attaching all sorts of strings to the money, so banks have been sending it back,” he says.
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