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December 27th, 2008

Local Banks Recognized In Capital Infusions

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The Treasury Department has begun to placate yet another group wondering “where’s my bailout?” Within the past week, the Treasury Department has pledged $4.7 billion in capital infusions to local banks. Once a category that seemed to be left out of the Treasury’s $250 billion worth of capital infusions, small banks are finally getting what they believed they always deserved.

Back in October, many smaller, community bankers were voicing opinions of frustration at the Bush Administration’s explicit backing of their much larger competitors.

According to the Treasury’s press release on 12/23/08, “To date, the Department has made $162 billion of investments, receiving preferred stock and warrants from participating institutions. Investments have ranged from as small as $1.5 million to as large as $25 billion, financing community banking and Community Development Financial Institutions in 41 states and Puerto Rico.”

Yet, it seems smaller banks haven’t been treated the same as larger competitors — and sometimes for good reason:

Until Tuesday, all banks had given warrants to Treasury in exchange for a capital investment.

In the latest round, Boston-based OneUnited Bank gave only preferred stock to the government. A Treasury spokeswoman said the bank caters to a low-income community, and the government did not want to penalize the bank with a warrant due to the service it provides.

READERS: Which banks do you think don’t deserve capital infusions?

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HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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