Economy

Georgia lawmakers fuming over distribution of bank bailout funds

WASHINGTON — Georgia bankers are seething at what they see as preferential treatment for California banks and lengthy delays when processing applications for federal funds meant to bail out the beleaguered banking industry.

Those funds from the Troubled Assets Relief Program, or TARP, are supposed to help shore up the financial health of the nation's banks and enable them to lend money in their communities. But Georgia bankers are running into roadblocks when they try to tap into TARP.

In some cases, Georgia banks apply for the funds and wait for months for a response only to be told by federal regulators responsible for administrating the money that guidelines have changed and the institution no longer qualifies under the new rules. In other cases, some Georgia banks have been quietly asked by federal regulators to withdraw applications for TARP money when it appears unlikely the bank would receive funds.

It is a sensitive topic.

Most banks are unwilling to come forward and publicly announce they were rejected for TARP funds or withdrew their applications. They're also fearful of angering federal regulators by speaking out about the delays.

"If the TARP board says we're not going to buy any of your stock then it is a death knell for the bank," said Sen. Johnny Isakson, R-Ga. Federal regulators "don't discuss the health of the banks ... it could cause a run on the stock of that bank."

According to Georgia bankers, 15 of the state's institutions have had TARP applications approved while hundreds of others have faced delays of several months. Georgia bankers complain that a much larger share of California banks have had applications approved.

"It's such an opaque system. There's no transparency in the process," said Joe Brannen, president of the Georgia Bankers Association.

During a recent meeting with officials from the Treasury Department, the Federal Reserve, the Federal Deposit Insurance Corp., the Comptroller of the Currency and Office of Thrift Supervision, Isakson and Sen. Saxby Chambliss, R-Ga., addressed issues of transparency in the TARP application process as well as the bankers' frustrations over the difficulty in getting information on the status of an individual bank's application.

"Banks from all across Georgia have expressed their concerns with the complex application process for TARP funds," Chambliss said. "Treasury and the regulators need to shed some light on these complex programs and provide greater transparency into their application process."

The senators also discussed what they see as the financial stress Georgia banks may face under the FDIC's plan to impose a one-time $15 billion increase in insurance fees collected from the nation's banks. This is a one-time charge of 20 cents for every $100 of insured deposits to be paid on Sept. 30.

Though bankers say it is their responsibility to replenish the FDIC fund, they worry about the cost. Georgia banks' share is estimated at $405 million.

The total aggregate income for all Georgia banks last year was $293 million.

Both senators also worry about the impact of an accounting practice called mark-to-market, where banks have to mark losses quarterly since they are forced to place present-day values on real estate assets that are designed to mature over time.

Isakson and Chambliss believe mark-to-market rules should be replaced with a mechanism of amortization or "smoothing" to absorb the assets over time.

"It's the number one thing we need to get changed," Isakson said. "The regulators are the problem, in my opinion."

(Notes on the Hill is an occasional column by Washington Correspondent Halimah Abdullah.)

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