Rep. Cathy McMorris Rodgers launched her re-election bid this week with familiar criticism of big-government programs – including one that is widely credited with saving hundreds of good-paying jobs in Spokane’s banking sector.
Seeking her fifth term, the Republican congresswoman specifically highlighted her opposition to the Troubled Asset Relief Program, the bipartisan, controversial $700 billion intervention that bailed out Wall Street and automakers. It was signed into law by former President George W. Bush amid the financial calamity of late 2008.
The measure also rescued Spokane-based Sterling Financial Corp., preserving the jobs of 600 people during the darkest days of the recession. Another 16 banks across Washington also used the program as a bulwark against the economic collapse. About half have fully repaid the U.S. Treasury.
McMorris Rodgers said Thursday that she was told by officials at Sterling and other banks that TARP was part of the problem faced by banks rather than a savior.
“They were put into a position where they had no choice other than to take the money,” McMorris Rodgers said she was told, “and with that came a lot of strings and a lot of requirements that were put on them.”
Sterling executives did not respond to an interview request Thursday.
Three years ago, however, Harold Gilkey, Sterling’s founder and chairman of the board, credited the federal intervention with helping the bank survive.
McMorris Rodgers said Thursday, “TARP was really for maybe three or four Wall Street institutions. Very big institutions. And still today I question whether or not TARP has really worked.”
She lists her opposition to TARP alongside her votes against federal health care reform and the federal stimulus package in her re-election literature.
“I point the finger to the big banks. They have not been held accountable for the bad decisions that they made. Bad behavior, improper risk and the traumatic impact they had on our economy. They turned the economy upside down in this country,” she said. “We have to have bankers locally that are tied to our community who understand the goals of our community and are willing to take a risk in this community when they think it’s appropriate.”
Sterling received the most aid from taxpayers in the Pacific Northwest – a $303 million investment.
In late 2010, former Sterling spokesman Dave Brukhardt told public radio that TARP saved Sterling.
The bank, like many others, had become overloaded with bad construction and real estate loans. It attempted to raise capital but wary investors shied away.The Treasury funds were a last resort. The debt to taxpayers was converted to common stock.
Sterling leveraged the Treasury investment to raise $730 million in new capital that ultimately led to a balance sheet turnabout.
Last month federal banking regulators lifted lingering restrictions against the bank.
Gilkey, Sterling’s former chairman, said in a February 2009 news release, “the Treasury’s Capital Purchase Program is expected to benefit taxpayers, the economy and banks. By increasing capital within the banking system, the government is ensuring that credit is readily available. Sterling will begin deploying this capital to support lending activities, which in turn should help stimulate economic activity in our region.”
Gilkey and several other executives were pushed aside as part of Sterling’s turnaround.
Other regional banks that used TARP funds include Washington Trust, which borrowed $110 million and repaid the debt last fall; and Banner Bank of Walla Walla, which has also repaid the $124 million it borrowed.
Inland Northwest Bank of Spokane borrowed about $10 million.
McMorris Rodgers has been among the leaders in the House Republican Conference since she was elected vice chair in 2008. Her selection makes her the highest-ranking Republican woman, and her name has surfaced as a possible vice presidential running mate with front-runner Mitt Romney.