Ten More Banks Join the Bailout

[Political Heretic]

Another 10 banks signed up for the federal program to help bolster “healthy” banks <1> during the economic downturn. The new participants, primarily small local or regional banks in the Midwest, will get a combined $85 million from the Treasury Department. Just how “healthy” some of banks in the program are is up for debate <2>, as we noted on Tuesday.

In the latest batch of investments, a top recipient was University Financial Corp <3>, a local bank whose mission is explicitly to serve economically disadvantaged communities in Minneapolis and St. Paul, Minn. It’s the Capital Purchase Program’s 14th community development bank, which combined have received one-tenth of 1 percent of the overall program commitments.

Here are the latest investments:

Suburban Illinois Bancorp, Inc. - $15 million

Duke Financial Group, Inc. - $12 million

Farmers Enterprises, Inc. - $12 million

University Financial Corp, Inc. - $11.9 million

Century Financial Services Corporation - $10 million

RCB Financial Corporation - $8.9 million

Biscayne Bancshares, Inc. - $6.4 million

Merchants and Manufacturers Bank Corporation - $3.5 million

Manhattan Bancshares, Inc. - $2.6 million

NEMO Bancshares Inc. - $2.3 million

Also, two small mortgage servicers joined the Making Home Affordable program for foreclosure relief <4>; based on estimates of the number of modifications they will provide, Washington state’s First Federal Savings and Loan was allocated up to $770,000, and California’s Wescom Central Credit Union up to $540,000.

http://www.propublica.org/ion/bailout/item/ten-more-banks-join-the-bailout-624#11259

Related:

Ever since the Treasury Department under Hank Paulson decided to invest billions <1> in banks across the country, Treasury officials have touted <2> the TARP investments as ways to bolster “healthy” banks during tough economic times. More than 600 banks (and credit card companies <3> and, soon, insurance companies <4>) have received money through the Capital Purchase Program <5>, the first bailout program Treasury launched and still the one representing the largest sum of TARP funds ($134 billion <5>), even after 10 large companies returned $68 billion <6>.

Recipient banks across the country have emphasized <7> that the program is not a bailout for banks. But some of the banks receiving money under the program don’t meet a common-sense definition of “healthy.” <8> Citigroup and Bank of America, for instance, were among the first banks to receive money, only to need further injections of it later.

Two recent reports call attention to the banks in the program that are struggling despite having received TARP funds.

The Sacramento Bee focuses on one local bank <9>, Community Business Bank <10>, one of the hundreds of community banks that have received TARP funds under $5 million. The Bee found that “those likely to benefit most from the taxpayer-funded windfall are a small group of insiders and their associates,” since about one-third of the bank’s loans have gone to those insiders, real estate loans that now imperil the bank. The CEO defended the bank’s health and practices, saying, “Our lending practices are very good. ... The problem is, the economy sucks.”

(snip)

But there is evidence <16> that regulators knew some of the banks were on shaky ground even before the banks received funds. In the case of Seacoast, for example, the bank disclosed <17> when it received TARP funds last December that it had reached an agreement with its primary regulator, the Office of the Comptroller of the Currency, to devise a strategy to diminish its exposure to risky assets. Recently, Seacoast said <18> it had suspended dividends to the government on the basis of advice from the Federal Reserve. The bank emphasized that it remained “well capitalized” by regulatory guidelines.

A recent report <19> from the Goverment Accountability Office said that 17 banks did not pay a dividend in May, most because state or federal regulations prohibited declaring dividends. One bank told Treasury it was because the bank was worried about its profitability. Three banks provided no explanation. All told, banks have missed about $6 million in payments, the GAO said. The report did not identify the banks.

http://www.propublica.org/ion/bailout/item/some-banks-in-healthy-bank-bailout-program-struggle-623

[xchrom]

1. recommend

[Political Heretic]

2. Kick

[Romulox]

3. This will mean raises all around, of course! nt