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. ...