TARP Is Not a 'Disadvantage': USBancorp CEO
Operating a company under the Troubled Asset Relief Program is not a disadvantage as much as it is an advantage to move away from it, said Richard Davis, president, chairman & CEO of U.S. Bancorp.
U.S. Bancorp announced Wednesday it will repay $6.6 billion it had received from the government through the TARP.
“We’ve already indicated our interest in repaying the warrants and we’ve created a valuation target that this company believes is appropriate,” Davis said in a live interview on CNBC. “I believe that we’ll find a number that’s very healthy for the taxpayers' return, and a fair number for our shareholders. I’m confident that it’s a few weeks, maybe a month away, from being completed.”
(To hear the full interview, watch the video above.)
Banks taking action to repay the TARP money is a “positive step” for the economy, Davis said.
“It says the banking system is moving forward from this difficult time and it’s symbolic that the first 10-15 banks have exited the TARP,” he said.
Some observers have been concerned that banks are rushing too fast to get out of the TARP, and that will have a dampening effect on lending to consumers. However, Davis said, the recent drop in lending is tied to a drop in consumer demand for loans.
“One of the best ways to evaluate demand is to look at unused commitment lines—and that usage has fallen in the last few months,” he said, suggesting that demand is down by more than the banks’ willingness to lend.
“I think it’s very important that we don’t set the recovery just by loan demand," he said. "It may not be the demand itself—it may be the end of a long recession and the appropriate steps that people are taking to right-size their lives.”
U.S. Bancorp will not be issuing any more debt backed by the Federal Deposit Insurance Corp., he said.