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Northern Trust to return government bailout money

Chicago-based bank says it will monitor entertainment spending after criticism of golf event activities

By Becky Yerak | Tribune reporter

February 28, 2009

Northern Trust Corp., which came under fire for its entertainment spending during a recent golf tournament, and IberiaBank Corp. are among the first banks planning to return federal bailout money to the government.

Chicago-based Northern, which caters to the wealthy, also said that in light of its approximately $1.5 billion capital infusion from the Treasury Department, it would ensure that future entertaining would be "appropriate, given the current environment."

Northern said Friday that it plans to repay the money "as quickly as prudently possible" under the Treasury's guidelines.

On Thursday, IberiaBank, based in Lafayette, La., filed paperwork to repay about $90 million it received in the Troubled Asset Relief Program's Capital Purchase Program.

About 400 banks in 47 states have participated since TARP began late last year.

Iberiabank said the program, in which the government bought preferred shares in banks, is more trouble than it was worth.

"We believe recent actions, interpretations and commentary regarding various aspects of the program places our company at an unacceptable competitive disadvantage," IberiaBank said. "Our board of directors has determined that continued participation in this program is no longer in the best interest of our company and its shareholders."

Northern was criticized by U.S. Rep. Barney Frank (D-Mass.) and 17 other legislators about its spending at the Northern Trust Open. It flew hundreds of clients and employees to Los Angeles, put some up at ritzy hotels and entertained them.

"We understand this is a time of great anxiety and financial distress, and your question regarding our support of an event such as the Northern Trust Open is legitimate," Chief Executive Frederick Waddell said in a letter Friday to Frank. "We deeply regret that some of the events associated with the Northern Trust Open have distracted from the positive nature of an event that has raised more than $50 million for charity since its inception."

Frank couldn't be reached for comment.

Northern said it didn't violate any terms of TARP, but that the company signaled it would be more sensitive about its entertainment spending until it repays the funds, which it received in November.

Northern reiterated that it didn't need the government money to do the entertaining.

The bank didn't provide a timetable nor explain how it would scale down entertainment until it repaid the government funds.

It added that loans and leases are up 21 percent from a year ago.

byerak@tribune.com