Independent Community Bankers Want TARP Focused On Main Street Banks

The Independent Bankers Association of America (ICBA) urged the Obama Administration last week to focus Troubled Asset Relief (TARP) funds on main street community banks.  TARP was recently extended to October 3, 2010.

The ICBA believes the administration should begin using TARP funds to assist community banks facilitate lending to small businesses in local communities, which in turn helps expand business and leads to job creation.

Thus far, the ICBA argues that TARP has been almosy exclusively pushed into big Wall Street Firms that are the main catalysts for the current financial environment.

“Unfortunately, the lion’s share of TARP capital has been deployed for Wall Street firms—the very institutions that helped create the financial crisis,” said Camden R. Fine, president and CEO of ICBA, in a press release.

The ICBA is asking the government to provide TARP capital at reasonable at more reasonable rates and terms, without onerous rules and restrictions on dividends and warrants.  This would allow banks to use said funds as a viable option to stimulate lending.  As of now many banks find TARP funds to be too expensive to employ.

“Boosting lending and economic activity in local communities is a new approach that should be vigorously advanced. With the extension of TARP, community banks can lend more capital to local small businesses–the economic engines that power our local communities,” added Fine.

The ICBA also recommended TARP funds be used to extend items in the American Recovery and Reinvestment Act of 2009, such as extending fee reductions and the higher guarantee levels through fiscal year 2011.

The association also believes the government should work toward restoring the value of Fannie Mae and Freddie Mac preferred stock to a reasonable level.  Community banks were urged by regulators to hold preferred stock in the two mortgage giants as part of their Tier 1 capital, which took a hefty hit when the government put the companies into conservatorship.

The ICBA believes with each dollar value restored in Fannie and Freddie preferred stock, an additional $7 to $10 in lending could occur.

In recent weeks, many ideas and agendas have surfaced on what to do with the billions in TARP funds that are left and have been returned by many big banks.