) -- The list of TARP deadbeats has been growing in size and scope, and proposed changes in capital requirements could put even more institutions at risk of falling behind on their bailout tabs with Uncle Sam.
The U.S. has tallied $2.6 billion worth of failed TARP investments to date, and lost part of its investments in four other banks in exchange for private recapitalization. Initially worth $911 million, the Treasury Department accepted haircuts ranging from roughly 17 cents on the dollar to 38 cents on the dollar, to woo private equity investments for
, and secure a buyout deal for
South Financial Group
The government lost $216 million on the
South Financial deal, though it's hard to tell the ultimate outcome for the other transactions, since the government will continue to hold a stake over time.
Perhaps more troubling is a growing list of delinquent banks. That list now stands at 81 firms that represent $2.2 billion in taxpayer dollars. Those numbers seems sure to grow when new capital rules are implemented, since the financial reform bill may not allow banks to use
trust preferred securities in Tier 1 calculations. The proposed rule change will leave many small banks struggling to plug capital holes all at the same time. It could also force the Treasury to convert more of its preferred stock into common equity, or take additional haircuts to incentivize private players to cough up more cash.
Still, the size of the Treasury's at-risk investments stood at an average of just $28 million per delinquent bank, as of April 30. The largest, a $300 million investment in
Citizens Republic Bancorp
( CRBC) remains a concern, but with capital levels well above
the "10-6-5" ratios that the
requires of a well-capitalized bank, Citizens Republic may not yet be entirely in the danger zone.
The other worrisome investment was $1.55 million put into
Saigon National Bank
. The West Coast bank has missed six dividend payments, thereby giving the Treasury the right to elect two board members, as it did with
American International Group
earlier this year.
There are 660 or so banks that have yet to repay TARP, but have stayed current on quarterly dividends at the same time. While many of them seem to have a good grip on their troubled loan portfolios, the financial reform bill's proposed capital standards pose a different kind of threat. Rochdale Securities analyst Richard Bove recently identified 58 banks that are "most in jeopardy" - in other words, most need to raise capital - if the strict standards pass.
The banks near the top of Bove's list that still owe TARP money are
East West Bancorp
Whitney Holding Co.
( WTNY) and
Larger, more high-profile banks that are on Bove's list, and also haven't repaid TARP include
On the other hand, banks have repaid nearly two-thirds of the $205 billion that the U.S. government plunged into its financial system via the Troubled Asset Relief Program. On top of the $135 billion in capital repayments, the Treasury has received more than $20 billion in interest, dividends and warrant proceeds -- a 15% return on investment to-date, according to the most recent data available.
A few weeks ago, the Treasury Department lowered its cost estimates for the broader, $700 billion TARP program, largely due to better values for its large supply of
stock, which the government is now selling in small blocks. The biggest money losers for the program are now expected to stem from government subsidies that banks are receiving to work out troubled homeowners' mortgages through HAMP, as well as the investments in AIG and the automakers -- not the banks.
"Programs that were designed to assist banking institutions will result in a net gain to the taxpayer," the Treasury said in its press release.
Ultimately, the big issue ahead for bailed-out banks appears to stem from a change to capital rules, rather than the toxic debt that had roiled the industry, and which TARP was intended to address. While shareholders will have to worry about dilution, and taxpayers will still need to worry about the cost of bad mortgage loans -- via the rescues of
( FRE) and AIG, whose debts loom large -- a few winners appear to be emerging from the bailout bonanza.
There are the multiplying numbers of private equity firms that are profiting from deals subsidized by the U.S. government, through FDIC-assisted transactions or Treasury haircuts. There's the consortium of Dune Capital Management, J.C. Flowers & Co.,Paulson Investment Co., MSD Capital and
, which took over the California-based lender
IndyMac and turned it into the expanding, and seemingly profitable franchise OneWest Bank.
Then there's the WL Ross & Co., Carlyle Group,
and Centerbridge Capital Partners trio, which entered the troubled Florida market with another FDIC-supported transaction for
BankUnited. More recently, Thomas H. Lee Partners, Warburg Pincus, Ford Financial Fund, Carlyle and Anchorage Advisors have stepped into the fray with investments in banks that are struggling in the Pacific Northwest and Mid-Atlantic regions.
There's also the Canadian lender,
, which has been on an acquisition spree down South. TD acquired Commerce Bancorp before the crisis came to full steam in 2007, was a bidder for BankUnited, before finally securing the acquisition of South Financial last month.
-- Written by Lauren Tara LaCapra in New York