Financial institutions that are getting government bailout funds have been told to put off evictions and modify mortgages for distressed homeowners. They must let shareholders vote on executive pay packages. They must slash dividends, cancel employee training and morale-building exercises, and withdraw job offers to foreign citizens. […]
Some bankers say the conditions have become so onerous that they want to return the bailout money. The list includes small banks like the TCF Financial Corporation of Wayzata, Minn., and Iberia Bank of Lafayette, La., as well as giants like Goldman Sachs and Wells Fargo.
They say they plan to return the money as quickly as possible or as soon as regulators set up a process to accept the refunds. On Tuesday, Signature Bank of New York announced that because of new executive pay restrictions in the economic stimulus package, it notified the Treasury that it intended to return the $120 million it had received from the government only three months ago.
This is why some conservative lawmakers on the Hill supported pay restrictions, even though it seemed like an odd position for a conservative to take. They wanted to make participation in the bailout as unappealing as possible, so that only truly troubled institutions would want to take part. The bailout’s architects (Henry Paulson et al) opposed pay limitations because they had a different vision — one in which the participation of healthy institutions blinded the market to which banks were truly troubled and which weren’t.
Considering this development, maybe we don’t need Geithner’s “stress test” to know which banks are healthy. Just look for the ones that are saying “no thanks” to being run by Barney Frank.