Even as five of the eight initial Capital Purchase Program recipients have redeemed their TARP investments with the Treasury, hundreds of applications are still being processed, as reported by the American Banker on June 26, 2009 (subscription required).
The Government Accountability Office said in a June 17 report that the Treasury had received more than 1,300 applications from federal regulators as of June 12, and that fewer than 100 were still awaiting a decision. The GAO also said bank regulators are reviewing another 220 applications that have not yet been forwarded to the Treasury.
Of the banking agencies, only the Office of Thrift Supervision details the Tarp application process. Of the roughly 800 companies it oversees, the OTS said 302 have applied for capital injections. Forty-nine have gotten the money and 140 have withdrawn their applications. Another 71 are in some state of review while 42 have yet to be considered.
The Treasury may emphasize that “fewer than 100 are still awaiting a decision,” but that excludes over 200 applications that are haven’t even made it to the Treasury yet. All told, there are probably 300 applicants that haven’t been told whether they are eligible to receive a TARP investment.
While the Treasury has emphasized that the TARP Capital Purchase Program was available to all eligible financial institutions, the delay in hearing any response has frustrated a number of community banks.
The extended deadline for the smallest financial institutions may alleviate some of the frustration, but the delay in processing is likely to have caused some institutions to have been denied as (i) the Treasury has slowly adopted higher standards for what constitutes viability, (ii) bank’s loan portfolios have continued to weaken generally, and (iii) prior TARP recipients have used the flexibility provided by the capital to sell real estate at low prices, causing further deterioration in the comparables used in the appraisal process – causing even further weakness in the loan portfolio.