Banks bear most costs of bank rescues, Kemper says
St. Louis banker David Kemper doesn’t like some of the rhetoric he’s hearing about bank bailouts. In particular, he said this morning in a speech at Washington University’s Olin School of Business, he doeesn’t like the fact that banks have become “whipping boys” for last year’s financial crisis.
Kemper, the chief executive of Commerce Bancshares, presented some numbers showing that taxpayers will approximately break even on measures the government has taken to rescue traditional banks, including Citigroup, Bank of America and other recipients of money through the Treasury’s Troubled Asset Relief Program. (Commerce, by the way, was the third-largest U.S. bank that didn’t take any TARP money.
Taxpayers will end up losing between $325 billion and $475 billion on TARP and other financial rescues, Kemper said, but essentially all of that will be on government-chartered mortgage companies Fannie Mae and Freddie Mac, insurance company American International Group and the auto industry.
Healthy banks like Commerce, meanwhile, will pay for their industry’s ills through higher assessments by the Federal Deposit Insurance Corp. Nine bank failures last Friday cost the insurance fund $2.5 billion, and, Kemper quipped:
Our share of that will be $4 million, so I don’t think we made any money last week. The FDIC is not a cost to the government; the FDIC is a cost to the banking industry.
Kemper, whose bank has assets of $18 billion, criticized a House Financial Services Committee proposal that would impose a “too big to fail” charge on banks with assets of more than $10 billion. He said:
I don’t think Commerce Bancshares is a systemic risk to the country. A lot of hedge funds are. They are not really regulating who’s taking the risks out there.
Kemper predicted that the nation will see about 200 more bank failures in the next two years. Many small banks, he said, are too concentrated in commercial real estate lending and won’t be able to earn enough money to overcome loan problems. A lot of banks that don’t fail will disappear through mergers, and, in Kemper’s view, that’s not a bad thing::
There’s way overcapacity in our market. There are 600 bank branches in St. Louis, and there probably ought to be 400. We have to rationalize some of the physical assets, but it’s hard to convince the other bankers that that’s what they ought to do.
(5 votes, average: 3.2 out of 5)
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David Nicklaus has covered St. Louis business for more than 25 years. His column appears three days a week on the Post-Dispatch business page. 
I agree with Mr Kemper…it isn’t just the banks that will be paying for the grocery list of spending that the Obama Administration has in store for us. Much like the healthy banks with solid business practices paying the higher price, we as citizens will be paying much more for energy (cap and tax), healthcare (at the expense of seniors, and those of us still working), and Obama is going to let the middle class tax cuts expire in 2010, which adds even more to the burden…..and we have to do it without complaint. David hit the nail on the head when he talked of the real guilty parties (hedge funds, right Goldman Sachs ? ) anyway, if you are working, hang on to your wallets, it gets bumpy from here….
Here, Here Mr. Kemper. Kudos to your firm for not selling your soul to the government for some short time aid.
pretty solid article…if only it was written by someone in big government.
I, like many like-minded progressives will refuse to listen to anyone of these rich, evil fat cats in the private sector; regardless if they make sense or not — I only take my information spoon-fed from the trusted almighty government or the King himself. –They always have my best interest.
Now that my rant is over… People, get ready for a long, long time of low deposit rates at banks. If you read the article, you’ll notice FDIC is charging banks nearly 4x what they were being charged two years ago for FDIC “insurance”. — that being said, even when the FED does decide to raise rates (which won’t be until the 2nd half of next year) ; banks will continue to keep interest rates low on deposits to help off-set this increase in fees from FDIC and to help recapture profits that the banking industry has lost over the last 24 months.
My advice: Municipal bonds.
Just my two cents… but what do I know… I’m in the “private sector”
I’m not sure I do agree with the rhetoric Mr. Kemper is bringing. He’s basically saying, from what I gather, that the taxpayers shouldn’t be complaining about losing $325 - $475 billion because the banks are on the hook for $2.5 billion in FDIC funds. I fail to see the correlation. I’ll trade you the $325 billion loss for your $2.5 billion loss any day.
Snootch, you can’t read.
He was saying that taxpayers shouldn’t be angry at banks as most banks have repaid a very large portion of the TARP money, some with interest.
WE SHOULD be very angry at Fannie/Freddie, AIG, and the Autos, because we WON’T be seeing any of the 325-475 billion spent on them.
Get it?
His bank didn’t take gov money. I say he’s one of the good guys.
Oh, and Commerce is being penalized for doing things right by paying higher premiums to FDIC. FDIC covers bank failures, not Federal government. So you have a bank that declined TARP money YET still will be penalized for the other idiots.
I guess I could say welcome to America Mr. Kemper. Where the people that do right subsidize and support those that do wrong through a forceful government.
Oh my, now that Mr Kemper has set us all straight , I feel so much better, that we will only be hit for approximately 475 billion. What he forgets to mention is yesterdays columns in WSJ indicating that little if any of the Bailout money will ever get paid back, and that there is a second round coming out to further line the pockets of Wall Street and some of the same banks Mr. Kemper mentions: (ie) CiTi and B of A. Will we see further failures Oh wise Mr. Kemper??? And will they be the same ones that recieved TARP funds. How will this ever be paid back, and if it is not, do we simply write it off to a “Bad Economic Time”?? Gee I never remember anyone knocking on my door during my rough economic times to tell me they were bailing me out and do not worry if you can not pay it back! Do You, Oh never mind I am quite sure of your answer. I believe the general populous is in for a very rude awakening, within the nexst several years. The economy is being stabilized by the Stimulus package and all the bailouts. This money will take about 24 months to run through the system.
Currently the publicized indicators of a turnaround are in actuality the delay of the inevitable caused by TARP and all its friendly other stimulus scams. Once it runs it’s course, we will simply be facing the real melt down, at which time it wil be intensified by Wall Streets new baby failure in the derivitive markets, and followed by the Credit card markets, and finally , about this same time, banks finally taking hits on their Residential and Commercial real-estate portfolio’s which they have been hiding for years and continue to worsen.
The cost of rescue eventually come from the tax paying public, unless the new law on the books of the FDIC, actually an old law that was just uncovered, which assists FDIC to go after owners and affiliated banks of Banks that have failed, for the cost of rescue.
But the burden, Oh Ivory tower apostel of deciet, will be born by the tax payer. The same tax payer who has allowed your institutions to flourish.
Please remember a very simply philosophy: It is NOT your money you “Bankers” are utilizing, it is the money of your depositors who have intrusted it to your fiduciary responsibility, and you have gone astray, because of greed .
cass avenue diva, I agree that the consumer will pay for the higher bank FDIC insurance fees in the end with higher loan rates and lower interest rates on savings.
My biggest problem is that there should have been no bailout and the Fed should have directly supplied loans to the consumer at lower rates similar to a non-profit as the margin would be lower than banks currently charge because you would have eliminated the middleman.
Amazedbythelunacy - I read just fine, thanks. And I AM mad at Fannie/Freddie, AIG, GM, Chrysler. I’m even more mad at my government for doing the bailouts in the first place. I’m also glad that Mr. Kemper’s bank didn’t take bailout funds at all and didn’t have them forced on them by the government. My problem was with what he said, which was basically, don’t be mad about losing $325-475 billion because we’re also losing $2.5 billion. That’s all. In regards to your second (third, actually) comment, you’re right, the people that do things right are penalized to cover those who do wrong. It’s happening to him and it’s happening to me.
Kemper can spin it any way he wants. There is plenty on blame to go around, including banks. We are supposed to feel better because they have paid back the TARP money? How much money was funneled through AIG to the banks that allowed them to repay the loans? How much did their wild derivative trading cause this mess in the first place? How much stock market manipulation is going on RIGHT NOW just to keep the financial stock prices afloat? And then there is always that pesky little credit card interest rate robbery that is taking place within the banking industry. While I applaud Commerce for refusing TARP money they will get ZERO sympathy from me.