According to the St. Louis Business Journal, Don Davis, who resigned this week as President of Centrue Bank in St. Louis is raising capital to buy a bank. Mr. Davis resigned because Centrue Bank couldn't find a way to honor Davis' contract under new pay restrictions imposed by Congress on banks such as Centrue that took loans under the Troubled Asset Relief Program (TARP). Centrue accepted $32.7 million, before the pay limits were imposed, because the Federal Deposit Insurance Corporation was encouraging banks to take TARP money to increase capital.
There are a lot of things going on here. The bank was encouraged to take the TARP money even though they were not in trouble. After the banks took the money, the pay limits were imposed. Centrue Bank now has to find a new bank president when Mr. Davis was obviously doing a good job. Mr. Davis will be fine. He and his partners will buy a small bank not tainted with TARP money and avoid the heavy-handed regulations that come with TARP, but this whole situation is totally unnecessary. How many people will have to fill out paperwork to make this work when the previous situation was perfectly fine?
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