Friday, May 15, 2009


Where will it stop? Hartmax, maker and retailer of men's suits, filed for bankruptcy in January. Wells Fargo had already lent $114 million to Hartmax at the time of the filing. It has lent $2o million more since the bankruptcy filing. Wells is now refusing to lend more to Hartmax since there is no tangible prospect for repayment. They believe they are throwing good money after bad.

Well, now members of Congress are considering pressuring Wells to continue to support Hartmax, according to Bloomberg, since Wells was a recipient of TARP funds. This is a dangerous road to go down. One has to presume that Wells is behaving as a rational lender in this case. Wells is likely evaluating how to maximize values of Hartmax because it will be paid first from any value that can be realized. If Wells has decided that it should no longer support Hartmax with more loans it is because Wells has determined risks attendant to more loans is not supported by the likely reward.

It is totally inappropriate for members of Congress to weigh in based on the fact that Wells received TARP funds. This is especially true with this week's revelations that Paulson forced TARP funds on the banks.

Cheers, Mike

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