The Hartford Buys Bank To Get TARP Money
A front page story in today’s Wall Street Journal reports that since the Treasury opened the TARP’s Capital Purchase Program (CPP) to privately held banks, state regulated insurance companies can buy a privately held bank as a way to gain access to the TARP which is open only to federally regulated financial institutions. (The insurance units of insurers who purchase banks would continue to be state regulated.) Even well capitalized insurance companies might use the bank purchase route as way to get TARP funds to make acquisitions, as TARP recipient PNC Bank did to buy National City.
Shannon Lapierre of Hartford Financial Services Group Inc. (HIG) told the WSJ that “the insurer worked with the Office of Thrift Supervision in identifying Federal Trust Corp, with $602 million in assets, as an acquisition candidate.” Hartford purchased the Sanford, Florida bank on November 14 for $10 million. Ms. Lapierre told the WSJ that “Hartford’s purchase of Federal Trust is contingent on Treasury’s approval of Hartford’s application for TARP aid.” (Federal Trust had large losses from construction loans; regulators told the bank in May to either raise capital or be acquired.)
In addition to Hartford buying a bank, yesterday insurers Genworth Financial (GNW) and Lincoln National Corp. (LNC) announced they are buying small S&Ls in the Midwest.
Related Post: “Paulson Dropped TARP Before Congress Approved It!”
Posted 11/18/2008 03:09:00 PM