In Texas, 'bailout' becomes fighting word for banks

Fort Worth Star-TelegramFebruary 4, 2009 

Rivalry between normally polite banks is getting down, dirty and very public with some using the government's TARP program as a handy target.

Just ask Alan B. White, the entrepreneurial founder-president of Dallas-based PlainsCapital Bank, who is lashing back at competitors who slam his participation in the U.S. Treasury's Troubled Asset Relief Program, aimed at jump-starting the economy. PlainsCapital received $87.6 million from TARP.

"I think it's a cheap shot," White said of a slew of barbed, anti-TARP ads, billboards and statements released by competitors, including Fort Worth-based Worthington National Bank and First Financial Bank of Abilene, which has branches in Southlake, Keller, Boyd, Decatur and Cleburne and owns Weatherford National Bank.

"They're running ads and throwing rocks and throwing mud," said White, who said his bank's TARP collaboration is a prudent way to expand business in a difficult capital environment. "Nobody gave me anything. I am having to pay 6.4 percent as a preferred dividend to the government."

Asked if there's a downside, White said it was having the federal government as a business partner.

"Those ads are misleading," he said. "I didn't take the money for [a] bailout. I took it as an opportunity."

But regional rivals see an opportunity to tap public apprehensions over the multibillion-dollar program that has yet to trickle down to the average borrower.

None of the 11 Texas banks accepting program money has described itself as being distressed. TARP infusions ranged from $3.2 million for Austin's Treaty Oak Bank to $2.5 billion for Dallas-based Comerica.

"This one doesn't need a bailout," boasts an ad for First Financial Bank, which opposed the program. "We have money to lend."

Anti-TARP billboards and newspaper ads for Worthington say, "Did your bank take a bailout? We didn’t," and "Just say no to bailout banks. Bank responsibly."

Worthington’s chief executive, Greg Morse, takes a view different from White's.

"We don't think that capitalizing on TARP funds is an opportunity," Morse said by e-mail. "Opportunity should exist for the private sector with private money, not government funds. We are trying to be a leader in our industry, a leader in our community and a leader to our children."

And the Worthington CEO defended his sniping ads and billboards by adding: "We think someone has to get the word out that solid and ethical banks exist."

White maintains that PlainsCapital is indeed healthy and growing. He hasn't yet utilized the $87.6 million. But by leveraging the federal investment, PlainsCapital will be able to put an additional "couple hundred million dollars to work."

PlainsCapital’s PrimeLending Mortgage unit plans to issue $100 million in so-called jumbo mortgages that start at $417,000 while the market for such loans is extremely tight, he said. Without the TARP funding, "I wouldn't do it."

PrimeLending abandoned the subprime market as a loan originator without getting burned in 2007, he said.

Some banks' subprime mortgages have had a high failure rate because they were issued to unqualified borrowers. These risky loans, bundled with higher-rated mortgages and sold as securities, are seen as a major cause of what has become a global banking crisis.

White said he had no way of knowing how many of PrimeLending's subprime mortgages resulted in foreclosure because all were marketed immediately to firms that bundled the loans and sold them off to investors.

PrimeLending today ranks high as a lender with a low failure rate for government-guaranteed loans, like FHA and VA, issued in Tarrant County. It had a default rate of 1.99 percent for these mortgages in 2008, well below the area’s median rate of 5.15 percent, according to the Department of Housing and Urban Development.

"One thing I am not going to do is loan to people who won't pay me back," White replied when asked how the TARP money will influence his lending criteria.

"That's how we got into this mess."

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