Message to TARP: Thanks, but No Thanks

Gerald Magpily at Dealscape has the dope on a bank that doesn't want TARP funds:

New York Community Bancorp Inc. is doing things its own way, traveling its usual path that has differed from the steps of its peers. For example, when NYCB purchases a bank, it usually maintains the name brand -- something practically unheard of in the industry today. When rivals were loosening credit and profiting from investments in toxic debt, NYCB stayed away and maintained its strict lending standards for mortgages. Fast forward to the present, and NYCB is in better financial health than many of its peers, so much so it has turned down a $596 million capital injection from the government's Troubled Asset Relief Plan.

The rejection of TARP funds is an affirmation that New York Community believes it will be able to weather the financial storm without government help. The taxpayers should be relieved, and investors in the company should be jubilant. After all, it shows that NYCB's slow-yet-conservative strategy of "production of multi-family loans on rent-regulated buildings, the maintenance of conservative credit standards, and the growth of our franchise through accretive acquisitions of local banks and thrifts," which kept its money out of exotic mortgages, was the right call. If only peers did the same. ...

The money would have been nice, Magpily explains, but the bank would have had to fork over 10 percent of its equity to the government. I suspect there are a scattering of these loners around the country--including Bedford-Falls-type banks where, as they saying goes "we don't lend on anything we can't see from the front window."

One thing that intrigues me is that when Bancorp buys a bank, it keeps the old name. I suppose I can see why this is unusual: I assume the thinking is that customers really want to believe they are part of a network. But maybe not: I've also heard it said that the most promising tactic for starting a new bank is to set up shop next door to the local outfit that just got bought out by a mega. Apparently you can make it on the angry and the disaffected. And anyone who watched Six Feet Under knows that funeral homes all get rolled up into a megacorp--which does everything it can to pretend it's still a mom and pop local business.