What is the risk associated with taking TARP money from the federal government?   If the government is going to create difficult milestones and lots of requirements — like limiting of CEO salaries and banning bonuses — it might not be the bonanza everyone seems to think.

We recently were contacted by a company that is turning into a bank just to get their share of the TARP and Stimulus dollars.  Of course, they may not understand the downside of being a bank which would include heavy regulatory compliance AND the ‘mark to market’ problems.

Thinking about a risk assessment for the TARP took another direction — what kind of formal risk process could be used by feds to judge whether a particular bank or company was TARP-worthy.   After you throw out all the joke lines — e.g., do they own corporate Gulfsteam jets?, then what would you look for?   Here’s a list of possible factors:

Value of company to overall economy
Ratio of bonuses to overall revenue
Ratio of CEO pay compared to overall revenue
Number of ‘retreats’ taken annually
Growth potential
Analysis of potentially impacting threats

These would be all mapped against the perceived value of the company in terms of dependencies, i.e., is the company the sole industry in its community or region?  

Is the company a critical element in the military industrial complex — does it have Defense implications?

Does it represent an underrepresented or endangered industry?

Past record for regulatory compliance.  It might be interesting to see how compliant the company was with previous regulations, as an indicator as to whether they would comply with all TARP/Stimulus bill requirements.

Obviously there might be a subjective edge to these ratings and the Government Accountability Office (GAO) would have to be the agency to administer these risk assessments.

Probably the hardest part would be ensuring that the recommendations made by GAO would be honored by the legislators.   But I like the risk model applied to the TARP.