Who Applied for TARP Capital?

November 15, 2008

Authored by: Robert Klingler

There is no complete answer, and that’s exactly how the Treasury and banking regulators want it.

Lists of Applicants

There are several lists of applicants: the Wall Street Journal has a list, FIG Partners has a list, and SNL Financial (account required) keeps a running tally of public announcements of applications, completions and decliners.  However, all of these lists are necessarily unofficial and incomplete, as they only include companies that have made voluntary public announcements.

There are no requirements that companies announce whether they have applied for TARP Capital.  The Treasury and federal banking regulators have made very clear that they will not publicly disclose the names of who applied for TARP Capital, or the names, if any, of companies that are ultimately turned down for TARP Capital.  (As noted by Assistant Treasury Secretary Kashkari on Monday, several opportunities will be made to allow applicants to withdraw their applications rather than facing a formal denial of applications.)  This confidentiality helps protect the overall stability of the banking system.

List of TARP Capital Recipients

Section 114(a) of Emergency Economic Stabilization Act of 2008 requires public disclosure of the completion of TARP purchases within two business days of the actual purchase.  (This is also confirmed in the Treasury’s FAQ, which provides “Treasury will provide electronic reports detailing any completed transactions, as required by the Emergency Economic Stabilization Act of 2008, within 48 hours.”)

The Treasury’s list of completed transactions is available here, and this is the only official list.  There is, however, a significant lag time between preliminary approval and completion of any given capital infusion.  The first TARP Capital infusions were not consummated until October 28th.  No further TARP Capital purchases were completed until November 14th (and the number and volume of the infusions that occurred on November 14th are not clear as of the time of this post).

When is Disclosure of Application Required?

Disclosure of an application is generally only going to be required when a company (or its executives) are trying to buy or sell securities, or when soliciting proxies from shareholders to approve corporate action related to the TARP Capital program.  While public companies will typically disclose such information through their SEC filings, private companies have even greater flexibility to limit the distribution of information regarding whether they have applied for TARP Capital.

Disclosure of approval by Treasury is far more likely to be disclosed by companies, but even such disclosure is not generally required by the securities laws for either public or private companies, except as noted above for the application generally.  Private companies may desire to announce loudly that they have been approved, but it seems unlikely that any central list will be kept for private companies that accept TARP Capital.

For public companies that need shareholder approval of blank check preferred stock in order to participate in the TARP Capital program, the filing of a proxy statement with the SEC is a relatively clear indication to the market that they have applied for TARP Capital, although there may be other reasons to add blank check preferred stock at this time as well.  This site maintains a partial list of companies that have filed proxy statements to authorize preferred stock, but the list is not designed to be a complete list but rather a list of sample proxy statements.

Why Hasn’t XYZ Bank Been Approved?

Most likely because the Treasury Department has not yet reviewed XYZ Bank’s application.  The deadline for publicly traded banks to submit applications to their primary federal regulator has just elapsed.  As noted by the Treasury Department, the TARP Capital funds were not first-come, first-served so there was no urgency to file early.  We know of several publicly traded banks that filed applications this week.  As noted by Assistant Treasury Secretary Kashkari on Monday, before forwarding the applications on to the Treasury Departments, the federal banking regulators first complete their own review of the application and make a recommendation.  As more and more applications are submitted to the regulators, this process will take considerably more time.

Moreover, the deadline for the vast majority of the banks in the United States to apply for TARP Capital has not been set.  Most banks in the United States, just like the vast majority of companies, are privately held.  The Treasury has announced that the November 14th deadline did not apply to privately held banks.  The Treasury is still determining how to structure the TARP Capital investment for private banks and has said it will provide a new reasonable deadline after finalizing the terms for private banks.  While the banking regulators are continuing to accept applications from private banks, we understand that the Treasury has asked that it not be sent these applications until further guidance is provided.

Proactive Decliners of TARP Capital

A growing list of banks have publicly announced that they will not be applying for TARP Capital.  Because of the potential negative consequences connected with being perceived to have been denied (or more likely being asked to withdraw an application) for TARP Capital, it is important for banks that are not seeking TARP Capital to be proactive in explaining to customers why they have not sought TARP Capital.  We have maintained a partial list of banks that are declining TARP Capital for banks looking for sample disclosures.