Westchester County Business Journal Banking on bailouts
Banking on bailouts
Will capital infusion restore liquidity?
Banks in the metropolitan region are using initial federal bailout funds to build up their capital base and expand their institutions, according to participating bankers. Yet there are few signs that Treasury Department officials’ stated goal of reopening frozen credit markets for businesses and other borrowers with the capital infusions to private lenders has been realized, according to banking experts.
Countering common perception, one economist representing a national small-business group last week called the credit crunch on Main Street “a myth” and said the federal bailout of large banks and Wall Street investment firms has little impact on small businesses.
As of Dec. 9, the U.S. Treasury Department had completed approximately $165.3 billion in payments to 88 financial institutions through its capital purchase program, part of the $700 billion authorized by Congress this fall under the Emergency Economic Stabilization Act. The government’s stock purchases range from $25 billion – at Citigroup Inc., JPMorgan Chase & Co. and Wells Fargo & Co. – to $1.7 million at Manhattan Bancorp in El Segundo, Calif.
In New York City, officials at seven-year-old Signature Bank expect to close this month on a $120 million stock sale to the Treasury Department through the capital purchase program. The full-service commercial bank operates two private-client offices in Westchester County, in White Plains and New Rochelle.
Signature Bank President and CEO Joseph J. DePaolo said the bank was invited by its Federal Deposit Insurance Corp. regulator to participate in the Treasury program. In September, Signature netted $148 million in a stock offering and ended the month with a total risk-based capital ratio of 16.11 percent, compared to the 10 percent regulatory requirement for well-capitalized banks. The federal money will raise Signature’s capital ratio to more than 19 percent. A $5.8 billion bank at the end of 2007, Signature will be a $7 billion bank by the end of this year, DePaolo said.
“We want to use it to continue to grow the institution. We felt that in these tumultuous times, the best thing you can do is to get as much capital as you can get,” said DePaolo, a Larchmont Woods resident and Iona College graduate.
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