Wells Fargo & Co. Chairman Richard Kovacevich criticized the U.S. for retroactively adding curbs to the Troubled Asset Relief Program (TARP), which he said forced the bank to cut its dividend, and called the administration's plan for stress-testing banks "asinine."
When the Treasury persuaded the nation's nine biggest banks to accept capital investments in October, it signaled the whole industry was weak, Kovacevich said in a speech Friday at Stanford University. Even though Wells Fargo didn't want the $25 billion, it must comply with the same rules that the government placed on banks that did need the money, he said.
"Is this America -- when you do what your government asks you to do and then retroactively you also have additional conditions?" Kovacevich said. "If we were not forced to take the TARP money, we would have been able to raise private capital at that time" and not needed to cut the dividend to preserve cash, he said.
Kovacevich joins a growing list of bankers who are chafing at restrictions imposed by TARP, which affect lending, foreclosures, pay and perks. TCF Financial Corp. of Wayzata said this month that it has asked to return its $361 million in bailout money.
The "stress test," designed to determine which of the 19 largest U.S. banks need more capital, provides opportunities for short-sellers to drive down bank stocks and can hurt confidence in the system even more, Kovacevich said.
The Obama administration announced the test last month and said it will help determine which banks are healthy enough to withstand surging unemployment and tumbling home prices. Results are due by late April, according to the Treasury.
"We do stress tests all the time on all of our portfolios," Kovacevich said. "We share those stress tests with our regulators. It is absolutely asinine that somebody would announce 'We're going to do stress tests for banks and we'll give you the answer in 12 weeks.' "
