Now that some Life Insurance Companies have received approval to apply for Federal TARP or Bailout funds, it is worthwhile to address some questions raised by the behavior of some large Corporations that have already received TARP funds.
TARP funds are loaned at lower interest rates than corporations can obtain anywhere else. "For starters, it's cheap capital." Antony Currie and Dwight Cass, "Breakviews.com/Shareholders Hurt in Bailout Payback" p. B2, col. 1 (New York Times Nat'l ed., Wed., May 13, 2009). Paying back TARP funds by issuing new shares can however have the effect of diluting the value of the existing shares held by the existing shareholders. Id.
The only apparent reasons for paying TARP funds back at this time are (1) limits on bonus payments to executives, officers and directors of the borrower and (2) the fear that other, unknown, unspecified limitations might be imposed on TARP loans in the future. See id.
Are these reasons enough to require Fiduciaries to pay back low-interest loans that cannot be obtained anywhere else, weighing the interests of the shareholders against the interests of the Fiduciaries, i.e., the executives, officers and directors?
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