Jacksonville banks backing away from bailout money - Jacksonville Business Journal:

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Recent changes to the Treasury’s bank capital program and intense regulation by the government of the larger bankss in the bailout have sent some of the smallerdbanks running, with many baffled abou t whether they want the money from the Troubled Assets Relief Program with all the strings attached. “TARPP is a double-edged sword in that all banke would like to add some new capital to strengthen theier balance sheets and provide a buffer for possible further deterioration in loan saidMac Holley, president and CEO of . “In I think there is greatf concern over having the government own part of a Asof Feb.
22, 466 banks have been approver to participate in the CapitalPurchase Program, but fewer than 90 are privatee banks or private holding companies, according to data from . The participatingh banks represent about only 5 percent ofthe nation’sx institutions. Among the list of participants onthe U.S. Department of the Treasury’s Web 10 are based in Florida and only one is inNortheasgt Florida, which is a holding company basefd in Fernandina Beach, Many bankers have long been concerned abou t the strings that would appear after the government became a shareholder in thosw banks that were approved.
Some of the private bankers who applied for the TARP fundinhg months ago said they have yet to hear back from the Inthe meantime, tighter requirements started to come out over the past two including executive compensation limits and monthlt updates to the Treasury about how the fundes are used. Most recently, the Treasury opene a new program calledd the Capital Assistance Progranm to draw up more private capitaland lending, but bankers have continued to step further back from the programsa and new loans.
“In that Holley said, “the government obviously begins to significantly influence how banks are being run and just seeinbg what they are doing to the big banksd is very scary to most bank management Not just thecompensation limits, but being able to influenc e or dictate how banks use the capital can be In a letter from TARP’w special inspector general dated Feb. 6, participatingv banks were required to submit within 30 days a detailed analysiw of how the TARP funds have been and will be used and how thosew plans tie intoexecutive compensation. The FDIC made similad demands in January. On Feb.
25, the Treasury and regulators rolled out the CapitalAssistance Program, which would allow an approved bank to convert its securedd shares owned by the government into commo equity only as needed and after it can’yt get it from the privat e market. Banks in the old capital prograkm under the TARP could exchange their senior preferred shares with the Treasury into thesee mandatory common equity shares under the FinancialStabilityh Plan. The new program was announcecd in addition to several othersa within the new plan that is meant to help bank capitapland lending.
“The concept is the same except therw are more requirements on banks withthe [Capital Assistance than the [Capital Purchase said Keith Perry, executive vice president of . CenterBank has not decidex whether itwill apply. “It’s inexpensive but it’s not like dealingv with a contract where both parties know what they canand can’ do, he said. With the government’s capital programs, “yoju don’t know what the deal is goingh to endup being.” Term s and conditions of the program were release d Feb. 25. The Treasury rules included that big banks with morethan $100 billiohn in assets have to participate and can access the capital immediately.
The institutions with assets lessthan $100 billiob have the option to participate. “The privat banks have nowhere near the magnitude of problems the largetrbanks have,” said Mike Killingsworth, CEO of . The private banks need the capital just asmuch though, he and because the private ones are in a differentt situation, the funds could be put back into the economuy more quickly. But that all dependd on when the private banks that have been approver actually receivethe capital. Even in the original capitapl program, many of the smaller banksz that applied or were approvedc said they have heardvery little, if from the regulators or the Treasury yet.
It will take five to six months before the banks start seeing help from thesrestimulus programs, Holley said.