Where 'Son of TARP' Could Create Jobs
Here is our initial read on potential direct jobs impact from the detailed financial stability plan unveiled today by Treasury Secretary Timothy Geithner.
Provision: Banks must prepare new disclosures of their balance sheet exposures. Reporting requirements will be drawn up in a joint effort among the Treasury, bank supervisors, the SEC and accounting standard-setters.
Our read: A potential source of fresh demand within banks' internal finance departments for accountants, financial analysts, and credit analysts - especially those skilled in evaluating exotic, distressed and less-liquid instruments. Risk management pros might also benefit.
Provision: Each institution that receives capital assistance must undergo "a forward looking comprehensive stress test." Treasury's fact sheet doesn't specify who'll perform the test, but it's likely to be handled by regulators rather than the banks themselves in the now thoroughly discredited style of Basel II.
Our read: The government itself might have to beef up its contingent of risk quants - either through direct hiring or contracting out.
Provision: The convertible preferred securities that Treasury obtains from banks in returns for Capital Assistance Program injections will be managed by a dedicated entity called the Financial Stability Trust.
Our read: Treasury has made many such investments since the initial TARP law's passage last October. To date, any hires and contracts to help manage these investments have occurred in a patchwork way. Look for the government to ramp up its demand for professionals skilled in managing portfolios of hybrid securities - of both troubled companies and financially strong companies. We don't have much sense yet whether the Financial Stability Trust will hire in-house or external portfolio managers. Guidance may emerge from the Treasury over the next few weeks.
Provision: Future aid recipients will be required to "show how every dollar of capital they receive is enabling them to preserve or generate new lending compared to what would have been possible without government capital assistance." They'll also have to report each month "how many new loans they provided to businesses and consumers and how many asset-backed and mortgage-backed securities they purchased, accompanied by a description of the lending environment in the communities and markets they serve...(and) a comparison to their most rigorous estimate of what their lending would have been in the absence of government support."
Our read: Another potentially big spur for banks to enlarge their internal finance departments. They might need more financial analysts and reporting professionals, credit professionals, economists, and possibly RFP writers. The added reporting requirements could boost demand for programmers, too.
Provision: New curbs on senior executive compensation, as described by President Obama on Feb. 4 - $500,000 total cash compensation ceiling, "say on pay" shareholder votes, and other new rules.
Our read: Possible increased need for compensation consultants to help institutions figure out how to remain competitive without running afoul of Treasury's restrictions. Compensation experts typically work as external consultants, but we wouldn't rule out the possibility of some marginal rise in demand for HR professionals who specialize in compensation issues.