TARP 101: financial experts weigh TARP pros and cons.

• Author: Warren, Larry
• Position: Feature

ask a Utah banker about the Troubled Asset Relief Program, or TARP, and the first thing they'll tell you is it is wildly misnamed. No bank's marketing department would ever call a program that lends federal money to strong banks as "troubled asset relief."

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TARP quickly mutated from a true "bailout" program for the likes of GM, Chrysler, AIG and other imploding mega companies into a program to inject additional capital into the American banking system. "At first Treasury did make loans--termed 'bailouts' to troubled financial companies," Utah Bankers Association President Howard Headlee says. "But then Treasury decided to try to stimulate the economy by investing the TARP money in healthy banks."

"There haven't been any troubled assets purchased," Celtic Bank President Phillip Ware says of the latest permutations of TARP. "They decided to inject capital into healthy banks rather than buy assets from the troubled ones."

And at the risk of misperceptions by citizens who don't understand the distinction, some Utah-based banks have signed up for and are receiving more than a billion dollars in federal TARP money.

Beehive Banking Today

While Utah's economy hasn't escaped the national turmoil, it is not one of the states hit hardest by the housing implosion. Neighboring states like Arizona, Nevada, California and more distant trouble spots like Michigan and Florida are poster states for the housing collapse.

"Yes, we are experiencing some of the difficulties gripping the nation," Wells Fargo economist Kelly Matthews reports. "But comparatively speaking, our housing situation is not nearly as bad."

"The Utah banking system is clearly under stress," state director of Financial Institutions Ed Leary adds. "Banks largely reflect the condition of the economy which in Utah is clearly stressed." Leary points out that three banks heavily involved in real estate lending, American West Bank, ANB and Magnet, failed in the past year.

And the news for many local banks is grim, with lowered expectations for 2009. "The community is hunkered down," Heber Valley Bank President Curtis Taylor says. "It's not dead in the water, but it's definitely slowed down."

"It's a time to be cautious," adds Cache Valley Bank President Gregg Miller. "Our plan is to survive 2009."

Show Me the Money

Miller's two-branch Logan community bank is one of many in Utah to receive TARP dollars. The government buys dividend-paying, non-voting...