One bank has just announced it wants to give the money back and another doesn't want to take any in the first place. As they say, "The devil's in the details," and for these Bay Area banks, there was just too much tied to the federal money to make it worth their while.
"We certainly pride ourselves on being an independent community bank, but it didn't sound to us like we were going to be very independent," says Eddie Downer, chairman of Mechanics Bank.
As soon as the Bank of Marin received $28 million in taxpayer dollars in December, it did what it was supposed to do -- make out loans.
"This is a good opportunity to increase our capital reserves, increase our lending activities, and really help our communities," says Russell Colombo, president and CEO of the Bank of Marin.
Unlike so many banks, the Bank of Marin was and is healthy, but regulators encouraged it to take the government money as part of the Troubled Asset Relief Program, or TARP, to get credit flowing again. The bank's plan was to pay it back in about three years, but now it plans to return the money in a matter of weeks.
"We thought it was best for the bank and for the community that we give the money back and remain independent," says Colombo.
Richmond-based Mechanics Bank couldn't agree more. It's turning down $60 million in TARP funds because of the heavy restrictions approved by Congress last month.
Banks who receive government money are prohibited from boosting dividends, required to reserve two seats on the board of directors for members of the Treasury Department, and are limited as to what they can pay their employees.
Downer says the compensation restrictions make no sense to him.
"That's how you stay in business by taking good care of people who are basically taking care of you," says Downer.
The Bank of Marin believes there should be two sets of rules, one for the banks who actually need the capital, and everyone else.
"Unfortunately what happens with things like AIG or Merrill Lynch or whatever it is, everybody gets thrown in the same basket and to me that's not where we should be as an organization," says Colombo.
The Bank of Marin hopes to return the TARP money soon, but it's still waiting for the Treasury Department, which must approve the request.