PhillyDeals: Official: Don't expect all the TARP money back

'It is extremely unlikely that the taxpayers will see a full return on their TARP investments," Neil Barofsky, special inspector general for the federal Troubled Asset Relief Program, will tell Congress in a report this morning.

According to a copy of that report, Barofsky isn't saying banks will stiff Treasury. He's more doubtful about payback from American International Group Inc., General Motors Co., and Chrysler Group L.L.C.

He also warns that Americans' financial behavior is being warped by: "Massive infusions of government capital into the very institutions that caused the crisis. Modifications of mortgages for homeowners who may have borrowed irresponsibly." And, "cheap" loans for investors to buy the same bad home-loan bonds "that were a major cause of the crisis."

Barofsky admits "TARP and related programs played a significant role in bringing the system back from the brink of collapse."

But, he warns, many Americans believe "TARP was created in secrecy to transfer wealth from taxpayers to Wall Street insiders." TARP banks are pocketing "billions of dollars of profits and record-setting bonus pools," while unemployment and foreclosures rise. Treasury seems to be keeping Wall Street rich, with taxpayers' money.

The mob's fears are government's fault, Barofsky says, for not coming clean sooner about TARP motives and uses.

How do you sell credit cards, at a time when people are scared for their jobs and spending less, and the government is making it harder for banks to raise rates on people with shaky credit?

Chase Card Services, the Wilmington-based Visa and MasterCard arm of JPMorgan Chase & Co., is moving upmarket, targeting affluent Americans who make at least $125,000 a year, pay their bills, and have relatively strong credit ratings, for its new Sapphire card, which it is rolling out in local campaigns, starting in Philadelphia this week.

The bank, which issues cards for Southwest Airlines Co., Marriott International Inc., and other big corporate "rewards" programs, has put ex-U.S. Army Capt. Sean O'Reilly in charge of a 100-person team that's pushing Sapphire with billboards at Amtrak's 30th Street Station and other sites, ads in The Inquirer and other local media, and "street teams" on Walnut Street and other shopping centers.

O'Reilly's a Wallingford dad, Notre Dame grad, and Wharton M.B.A. candidate who used to help run Philip Morris' Marlboro Man ad campaign and Walt Disney Co.'s at-home Moviebeam service for Chicago-based Leo Burnett ad agency.

After tobacco-makers agreed to stop advertising and Disney made peace with cable TV, O'Reilly went into consumer finance.

Sapphire offers a flexible "rewards" program redeemable for cash and discounts at a penny-per-dollar spent, or more if you pay an annual fee of $85 a year, designed to beat a $95 fee for a similar American Express Co. card.

Customer service matters a lot to the well-off, O'Reilly says. Chase gives them live operators at 24-hour call centers in Ohio, Missouri, Texas, and Florida. The bank processes most card applicants in the Philippines.

Chase employs 6,500 in Wilmington, roughly the same as Bank of America Corp.'s rival card shop across town. BofA card boss Ric Struthers wrote, in a report last summer, that the new government rules mean consumers "make their credit card choices based on attributes other than price."

BofA spokeswoman Betty Riess didn't elaborate. BofA's card arm has cut more jobs and written off more bad loans than Chase in the past year, according to federal data.

"Philadelphia is a great market for us," O'Reilly told me. "There's a million affluent individuals here," and Chase has no local branches, "so we can go in and make an impact." Chase Sapphire also wants "cultural, arts, entertainment, and sports events" to sponsor.

A long way from subprime loans? Right, said Chase spokesman Paul Hartwick: "You just don't have the loss rates with the affluent marketplace that you have with the others."