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发帖数: 29846 | 1 By VICTORIA MCGRANE,ROBIN SIDEL and JEFFREY SPARSHOTT
Hundreds of small banks can't afford to repay federal bailout loans, a top
watchdog will warn Wednesday in a report that challenges the government's
upbeat assessment of its financial-system rescue.
Christy Romero, special inspector general for the Troubled Asset Relief
Program, said 351 small banks with some $15 billion in outstanding TARP
loans face a "significant challenge" in raising new funds to repay the
government.
Ms. Romero made the comments in her quarterly report to Congress, the first
since the Senate approved her appointment in March as special inspector
general for the program. She urged the government and regulators to find a
way to help banks raise funds to repay the loans.
"The status of those banks is one of the major issues facing TARP nearly
four years after the financial crisis," the report says.
The report is the latest sign of a yearslong squeeze on smaller banks, those
with less than $1 billion in assets. Their numbers and profitability have
been declining due in part to regulatory and technological changes that made
bigger institutions more profitable.
StoneCastle Partners LLC, a New York firm that has invested in about 800
community banks, estimates that community banks need $90 billion in fresh
capital to clean up their balance sheets and acquire other institutions.
Many of the banks cited in the report aren't known outside of their
neighborhoods, where they count local business owners and prominent families
as their investors and customers. Some cater to specific customers. For
example, Saigon National Bank in Westminster, Calif., serves the Vietnamese
community through one branch.
Saigon National, which received $1.5 million in TARP funds, has missed 13
dividend payments to the government worth $265,328. The report cited the
bank, which has $59 million in assets, as one of the smallest that received
TARP funds. William Lu, the bank's president and chief executive couldn't be
reached for comment.
The report contrasts with recent efforts by the Treasury Department to
emphasize the program's financial success, ahead of November's elections.
The Congressional Budget Office in December forecast a lifetime cost of $34
billion for TARP, reflecting expected future payments. Treasury has spent $
414 billion on TARP and taken in some $330 billion in dividends and
repayments.
The government still owns large stakes in companies such as Ally Financial
Inc.,American International Group Inc. and General Motors Co., GM +0.50% but
the Treasury recently has taken to saying it may make money on the
financial-system rescue.
"Overall, the government is now expected to at least break even on its
financial stability programs and may realize a positive return," Treasury
said in a report last week.
But Ms. Romero questioned that statement, noting that taxpayers are still
owed $118 billion, a figure she said included investments in AIG, GM, Allly
Financial and other smaller programs under the TARP umbrella in addition to
the outstanding loans to smaller banks. She also counted $4.2 billion
Treasury had written off and realized losses of $9.8 billion "that taxpayers
will never get back."
The Treasury Department said it had already recovered more than it invested
in TARP's bank programs through repayments and other income. "Moving forward
, while there's no one-size-fits-all approach, you'll continue to see us
make significant additional progress winding down the program in the year
ahead through repayments, sales, and other methods," Assistant Secretary for
Financial Stability Tim Massad said.
When customers are placed on hold after calling PremierWest Bank in Medford,
Ore., they may hear a recorded message that assures them "there is no
credit crisis" at the bank, which has "money to lend."
The bank's parent, PremierWest Bancorp., is one of the hundreds of small
financial institutions that hasn't repaid its $41.4 million in TARP funds.
PremierWest expanded during a real-estate boom that was partly fueled by
retirees and wealthy Californians who flooded into Oregon to build new homes
. The bank reported a $4.8 million quarterly loss on Tuesday and hasn't yet
repaid the government despite efforts to shrink its balance sheet, cut costs
and close branches.
PremierWest also has missed 10 quarterly dividend payments to the government
, prompting the Treasury Department to appoint a director to its board last
month. James Ford, the bank's chief executive, couldn't be reached for
comment.
Ms. Romero criticized the Treasury for having "no concrete plan" to get the
small banks out of TARP and what to do with those banks that cannot repay
the TARP funds.
"There is nothing more that we'd like than to repay it," said Paul
Brunkhorst, chief executive officer of Crazy Woman Creek Bancorp Inc., a
bank holding company that has $144 million in assets and $3.1 million in
government funds. He said the Buffalo, Wyo., bank, which operates four
branches as Buffalo Federal Savings Bank, is still struggling with uncertain
economic trends and is concerned about future capital requirements.
The struggling banks are unlikely to find any help on Capitol Hill. Rep.
Scott Garrett (R., N.J.), a TARP critic, called the plight of the small
banks another example of how "ill-conceived" the rescue was in the first
place.
"It was not thought through as to how it would be implemented... it was not
thought through how they're going to extricate themselves," he said.
Still, Joshua Siegel, a managing principal at StoneCastle, said that the
TARP program provided much-needed confidence during the financial crisis.
"In terms of a public policy move, it was very successful. In terms of an
investment strategy, it was less successful," he said.
Write to Victoria McGrane at v**************[email protected], Robin Sidel at robin.
s***[email protected] and Jeffrey Sparshott at j***************[email protected] |
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