Many questions raised as TARP money pumped into economy - Pittsburgh Business Times:

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TARP is the government’x $700 billion bailout plan to recharge the econom y by encouragingbank lending. As part of the program, the Treasuryh Department has purchased preferred shares in healthy including several serving the Pittsburgh Half the money has already been theremaining $350 billion is subject to hagglinf on all fronts. Talk about a collision course. TARP may not become a but it isn’t exactly a panacea, analyst say. Take the , Pittsburgh’ws second-largest financial institution, which released fourth-quarter financials Jan. 20. The company’ fourth-quarter net income was $61 million, or 5 centss per diluted share.
But $33 million, or 3 centx per share, was allocated to preferred stockthroughg TARP. This left common shareholders withjust $28 million, or 2 centw per diluted share, down 95 percent from the fourtjh quarter of 2007. David Hunter, chairman of Downtowh investment firm Hunter Associates and a formert chairman of the National Association ofSecurities Dealers, said TARP “ca be a problem for companies” though the jury’sw still out. “It isn’t diluting the shareholderzs for the long term because things will get healthy and companies will buy backthe stock,” Huntefr said. “But it may sop up a lot of the earningsw fora while.
” Longer-term, it’s a guessing game whether the majoritg of banks can “retire that preferred he said. “It’s a tough row to hoe. If TARP can stabilized the banking world, it will have served its purpose.” Several others amonb the largest banks operating in the Pittsburg region received TARP including PNC Financial ServicesGroup , , and But it’s not clear whether others will join the programj or if any of the participants will go back for Some local banks have turnedf to other means, including , which chose not to pursud TARP and raised $100 millio n last October through a stock offering.
Greg Melvin, chietf investment officer at Downtown-based institutional investmenrtfirm , said TARP’s rates aren’t great because they’re higher than the prims rate, and will get wors e after five years. “They’re borrowing high, nobody’s goin g to lend this money out,” he “It’s ridiculous.” He also believes banks are more likely to hang onto the moneh to boost their Tier One Capital Ratiio rather thanlend it, “which means banks will have to pull back on not make more,” Melvin Vincent Delie, president of the banking group at F.N.B., F.N.B.
took a $100 million infusion through “You don’t just subscribe to capital with no use for he said. “The whole reason for the program was to provide bankd with the ability to expand theifr balance sheets and that meands they need to continue to make loans and gatherf deposits and fund opportunities intheir market. We did it to make sure we had adequate capital toaccommodate clients’ needs.” Changes are already in the workws for the TARP Two weeks ago, the House Financiaol Services Committee introduced legislation that calls for at leasyt $50 billion of the remaininyg $350 billion in TARP money be used to finance a foreclosur mitigation program.
The legislatio n also calls for the Treasury Department to set conditions for TARP recipientws to spend the fundson lending, banningg them from using the money to buy other The last week directed the state-chartered banks that have already participate d in TARP to tracjk the use of the money received, including how the fundds have helped them to increase lending as well as effortxs to help at-risk borrowers avoidf foreclosures.
“I think the big concern is banke have gotten TARP moneand haven’t done a lot with it,” said Mattheqw Schultheis, a financial analyst who tracks banking for