Dividends are paid out of retained earnings, which is the accumulated net income of the business. They are not paid out of direct investment accounts such as preferred stock. The TARP money was in the form purchase of preferred stock, which is a completely separate account than retained earnings.
No, I did not miss that. I am a CPA. Capital accounts are what are CHARGED for dividend distributions, but all dividends are PAID with CASH. No cash = no dividends, unless it is take-in-kind, such as dental floss from a floss or toothbrush manufactureer.