MidSouth Bank President Rusty Cloutier appeared on Capitol Hill yesterday to testify at a congressional subcomittee hearing titled “TARP Oversight: Is TARP working for Main Street?” In typical fashion, Cloutier did not mince words in expressing his frustration over the federal government’s handling of the financial industry bailout. MidSouth Bank accepted $20 million through TARP’s Capitol Purchase Program - money Cloutier said his bank is having second thoughts about accepting due to new burdensome regulations the federal government is considering imposing on participating banks. The government has already imposed limits on compensation bonuses and has discussed more drastic oversight, including having regulators sit in on executive board meetings. "I think all community banks have lost confidence in the federal government’s ability to negotiate with them," he said.
Cloutier testified new regulations have been proposed because of the massive failings and losses incurred by the “Big 8” financial institutions, including Morgan Stanley, AIG and Goldman Sachs. He added community banks, the majority of which did not engage in risky lending, should not be punished as a result. Cloutier, a former chairman of the Independent Community Bankers of America, testified, “ICBA believes that compensation restrictions and new corporate governance regulations should be focused on the larger TARP recipients that have undermined the public confidence in the treasury’s recovery efforts. If the government changes its agreement with MidSouth by adding new barriorsome conditions, MidSouth will have to re-evaluate its continuing participation in the CPP program as our hometown competitor IberiaBank did when it paid back the CPP funds this week. It would be a shame if new burdened conditions forced MidSouth to withdraw from the program because MidSouth has proven itself to be a responsible partner in the effort to revitalize the economy.”
Cloutier added that community banks are already bracing for higher premiums and surcharges recently proposed by the FDIC, another example, he said, of the small banks having to pay for the failings of the larger financial conglomerates. He said the “No.1 thing” the government could do to help community banks would be to separate community banks from the Big 8 in any capital injection program and negotiations. [The Big 8] are in a different league,” Cloutier said. “They’re playing in the NFL. I’m playing in junior high school.”
Watch a video of the hearing by following the link here. Cloutier's testimony begins about 35 minutes in.