Bailout needs to trickle all the way down
There’s something to be said for a yearlong hiatus as business columnist: 2008? Not my fault.
But certainly a missed opportunity, because the past 12 months were such a target-rich environment.
I was not aboard the Bear Stearns-Lehman Bros.-AIG train wreck.
Missed the crash-and-burn of the Detroit Air Force at the hands of aces Alan Mullaly, Rich Wagoner and Bob Nardelli.
Did not get mutual-ated in the collapse of Washington Mutual Bank.
My 401(k) took some licks, but I cannot blame Bernard Madoff. I wish I could.
Sadly, all these stories will continue to play out in 2009. It will take a long time to drain this economic swamp.
Which brings us to the Troubled Asset Relief Program, or TARP, the centerpiece of the $700 billion bailout package for the financial services industry. Initially intended to thaw credit markets by clearing the junk off bank balance sheets, TARP has become lender of first resort for insurers, GMAC, and whomever.
Homeowners looking for mortgage relief? Not so much.
Executives at a few of the Northwest banks that have received TARP money say they plan to put the money to work helping homeowners and small business. How soon that can be done is the question.
As of Dec. 23, 14 banks in Washington, Oregon and Idaho had received just over $1 billion from the U.S. Treasury. The banks could leverage that new capital up to about $10 billion in new loans. To put that in perspective, Sterling Financial Corp. had a little more than $11 billion in loans on its books as of Oct. 31.
Sterling, the largest Northwest-based bank with the demise of Washington Mutual, is also the biggest recipient of Treasury money: $303 million.
Sterling Executive Vice President Dan Byrne said officers are still putting together a plan for deploying the funds.
Although Sterling has been a serial buyer of other banks, he said the company will remain on the sidelines for now.
“Treasury wants us to lend to business and consumers,” Byrne said, noting a congressional panel tracking TARP is already asking where the money went.
Walla Walla-based Banner Bank received a $124 million dose of Treasury money. Vice President Doug Bayne said Banner, too, will focus on lending in the communities it already serves before taking on another bank. Banner bought Farmers & Merchants Bank of Spokane Valley in 2007.
“This was an historic move by the federal government to encourage the offering of credit,” Bayne said.
“It will have a very positive impact on consumers.”
Intermountain Community Bancorp President Curt Hecker echoed his competitors.
“The main thing that we wanted to be able to do is help our existing customer base,” he said.
Intermountain is the only Idaho bank that has received TARP money. Hecker said the state’s drooping economy has softened loan demand, and putting the $27 million from Treasury to work may take time.
Pressure from impatient consumer and homeowner groups may soon take some of that time off the clock. Foreclosures continue at a record pace, and the Northwest has not been immune.
Newly retired Evergreen State College professor Dan Leahy said notices in Thurston County have doubled, and he has written a letter to bank officials, U.S. Sens. Maria Cantwell and Patty Murray, and others seeking an accounting for the federal dollars invested in Washington banks.
“Banks are enormously sensitive to public pressure,” said Leahy, a former candidate for super- intendent of public instruction.
Byrne said the law creating TARP allows for rule changes. Sterling is trying to anticipate whatever new guidance comes from the new president and Congress, he said.
Reeling homeowners should be put back in the picture. If not through TARP, then by some other means that will improve on the high failure rate for renegotiated home loans.
With the Treasury borrowing money at 2 percent and lending it at 5 percent to the banks, taxpayers are getting a heck of a deal.
But the economy will not get right unless the freefall in home prices – excepting the Spokane area – has been arrested before the end of 2009.