Will banks be pressured to aggressively lend out Fed capital infusions?
*Wall Street Journal, By David Enrich and Robin Sidel, October 31, 2008:
"As political pressure mounts, at least a few banks are promising to
use capital infusions from the federal government's bailout program to
swiftly make new loans. But it might not be enough to offset the
lending shortfall that is threatening the economy.
Deploying the flood of cash dispensed by the Treasury has been a
contentious issue, following the agency's move earlier this month to
pump $250 billion into financial institutions. Some banks initially
said they didn't expect to quickly use the capital, leading lawmakers
to question the effectiveness of the government's Troubled Asset Relief
Program, or TARP.
Now, though, some banks are revving up plans to pour their new capital
into loans. "We do expect to start deploying it almost immediately,"
said Doyle Arnold, chief financial officer of Zions Bancorp, a Salt
Lake City lender that is slated to receive $1.4 billion through TARP.
Two weeks ago, Mr. Arnold predicted the federal injections probably
would have a muted impact on lending.
Zions, with $54 billion of assets and more than 500 branches,
"basically shut down" its lending operations in the third quarter due
to depleted capital levels, Mr. Arnold said. Its coffers replenished,
Zions now plans to lend out "several hundred million dollars" by year's
end. Next year, Zions expects to be able to make as much as $750
million worth of new loans each quarter.
Webster Financial Corp., a Waterbury, Conn., bank with $17.5 billion of
assets, is waiting for the Treasury to approve its application for
capital. When that happens, Webster will publicly vow "to lend every
single dollar into the market," said Chief Executive James C. Smith.
Doing so is simply "the right thing to do," he said, not a response to
outside pressure."
*This information is solely a highlight of the opinion of a third-party publication and is incomplete. Please subscribe to this publication for the full and timely opinion of the author and call a Monex Account Representative for any additional up-to-date information. This is not an offer to buy or sell precious metals. Investors should obtain advice based on their own individual circumstances and understand the risk before making any investment decision.
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