To T.A.R.P. or not to T.A.R.P.
To accept T.A.R.P. (Troubled Asset Relief Program) funds from our government or not depends on the structure of the institution’s balance sheet, the proposed usage of these funds and of course, the inclination of the institution’s decision makers.
Bank of New Jersey has decided to neither apply for nor accept any T.A.R.P. funds because:
A) We are more than well-capitalized;
B) There is a significant interest cost for the funds;
C) We feel that acceptance of T.A.R.P. funds is a sign of weakness;
D) We need less government intervention – not more.
In summary, if a bank is using T.A.R.P. to “dress up” their balance sheet or to make loans which may yield less than the interest expense payable to the government or if the bank fails to consider that there are other strings attached, they could be making a mistake. If our shareholders wanted to dilute the stock and have the government as an owner of the bank, they would have said so.