Four Banks Are First to Return U.S. Aid

Four Banks Are First to Return U.S. Aid - 4/1/2009

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2009 News and Press Releases

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HEADLINES \| SETTLEMENTS AND DISMISSALS \| COURT FILINGS LINKS TO OTHER NEWS \| NEWS ARCHIVE	HEADLINES ARCHIVED SETTLEMENTS AND DISMISSALS ARCHIVED

HEADLINE NEWS:

Four Banks Are First to Return U.S. Aid, Early Repayments Could Hurt Lending
Binyamin Appelbaum

Washington Post. April 1, 2009
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EXCERPT: Four regional banks from around the country yesterday became the first firms to repay emergency aid from the government, but the show of strength also underscored concerns about the health of a key element of the federal economic recovery program. The Treasury Department has invested almost $200 billion in more than 500 banks to support new lending to consumers and businesses, but the growing clamor among recipients to repay the aid earlier than planned threatens to diminish the impact. The largest bank to exit, Signature Bank of New York, which returned $120 million, said it was acting to avoid the effects of congressional restrictions on aid recipients, including limits on pay that could drive away its most productive employees. Chief executive Joseph J. DePaolo also said that the aid had become an undeserved scarlet letter because of public perception that the program was being used to save troubled banks, rather than buttressing healthy firms. […] The concern now is that repayments by healthier banks will pressure less healthy banks to follow suit when they should conserve resources and that it will damage confidence in banks that cannot repay the money. The departures reflect changes in the original program. The Bush administration imposed few restrictions on recipients. But Congress grew increasingly convinced that the terms were too lenient, in part because aid flowed disproportionately to troubled banks.

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