Financial firms eligible for the federal government’s Troubled Asset Relief Program (TARP) are largely unsure of the plan’s implementation and may therefore decline assistance. A survey of more than 400 financial firms by the Securities Industry and Financial Markets Association (SIFMA) found that a lack of clarity as to TARP’s implementation would lead 91 percent of these firms to be less likely to participate.
The SIFMA survey polled 445 financial firms eligible to receive TARP assistance in an effort to determine the industry’s support and/or reluctance for the Treasury’s bailout plan. Of the 445, 86 percent had assets of less than $1 billion, with 52 percent of these firms claiming they would participate in TARP if asset purchase prices were acceptable. Less than 5 percent of respondents had assets of over $5 billion, yet 70 percent of these claimed they would accept assistance.
The TARP program was established by the Treasury department as a bulk of the $700 billion bailout, but has not gone into effect as immediately as some financial firms might have hoped. Though the Treasury has begun the process of amassing the necessary personnel and mechanisms for purchasing troubled assets from the troubled firms, buyback has yet to begin.
The survey found that firms were hesitant to embrace TARP on a number of fronts besides a perceived lack of clarity in its implementation. 88 percent of respondents also said they would be less likely to participate due to a requirement of issuing securities warrants to the Treasury if selling assets. Other issues of reluctance were investor perception as to the validity of the TARP sale and the potential of altered executive compensation.