This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

TARP Deadline Could Cue Bank M&A

Today's deadline to apply for U.S. government investments through the $700 billion bailout bill Congress approved last month could usher in a new round of M&A for the banking sector.

Wittingly or not, the U.S. government's Troubled Asset Relief Program, or TARP, is likely to end up deciding which banks survive and which either fail or get acquired at a bargain basement price. Government officials administering the program have said it will not be used to prop up weak banks. That means any bank that applies and doesn't receive equity from the government will have what amounts to an official stamp of disapproval from its regulator.

"What I worry about is that the media picks up on institutions that didn't get approved for the program and everybody can analyze the fact that they would be helped by this additional capital and it may cause runs on those particular banks," says Tom Brown, head of financial-services hedge fund Second Curve Capital.

This is particularly troubling to Brown, because he believes regulators are prone to making some poor judgments. He cites the case of National City (NCC), which had a Tier-1 ratio of greater than 10%, but was turned down for TARP, forcing it into the arms of PNC Financial Services Group (PNC - Get Report) for $2.25 per share Oct. 24, below its $2.75 closing price the day before.

A call to a Treasury spokeswoman was not returned.

"I think what we're going to find out years from now is there is a fairly high element of arbitrary-ness in this," Brown says.

1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
SYM TRADE IT LAST %CHG
ABCW $36.71 0.00%
AIG $58.15 0.00%
CFR $74.13 0.00%
GS $196.25 0.00%
JPM $63.92 0.00%

Markets

DOW 17,841.98 -86.22 -0.48%
S&P 500 2,080.15 -9.31 -0.45%
NASDAQ 4,919.6440 -19.6830 -0.40%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs