Regional banks to accept U.S. bailout investment

WASHINGTON — The Treasury Department will announce as soon as Friday that a group of large regional banks have agreed to accept investments from the government, industry sources said. The new banks would join nine of the very largest American banks, including Bank of America and J.P. Morgan Chase, which were forced to accept $125 billion in funding last week.

Separately, Treasury’s plan to buy mortgage-related assets from banks appears to have stalled, industry sources said. Banks say that basic questions about the plan remain unanswered. Applicants to serve as asset managers have received little additional information from Treasury in about a week, the source said. It is not clear, for example, whether banks that manage assets can also sell assets to the government.

The latest developments underscore the sea change in Treasury’s approach to helping the financial industry. The $700 billion asset-buying plan pitched to Congress starting last month has been set aside in favor of an initiative to invest at least $250 billion in banks, and possibly more, with almost no restrictions on how the banks can use the money.

Treasury officials said today that there would be no delay in the auction process, and declined to comment on plans to announce more bank investments.

The sources cautioned that list of participants and the amounts of money were not final as of tonight. They spoke on condition of anonymity because they were not authorized to speak for the participating institutions.

The announcement of new participants in the bank investment plan, including Utah-based Zions Bancorporation, is intended to reassure the public, politicians and investors that Treasury is making progress, the sources said. It is also meant to show that regional banks are now volunteering to participate and to help jumpstart the economy. Regional banks are major lenders to mid-sized companies.

But progress remains halting. Treasury has yet to give government money to the first nine banks, because of continued legal wrangling over the details of the investment agreements. And Assistant Treasury Secretary Neel Kashkari, the official responsible for the program, said in testimony before Congress Thursday that the next round of banks likely won’t get funding for “a few weeks.”

Banks that accept government investments must agree in return to issue the government shares of preferred stock, which pay annual interest of 5 percent, and warrants for shares of common stock, which allow the government to profit as the company’s share price rises. Banks also must accept some limits on executive compensation, and cannot raise dividends without permission.

Officials have publicly urged companies to increase their lending, to help revive the economy, but privately concede that they cannot force banks to lend. Indeed, officials argue that for some institutions, the best use of the money may be plugging holes in the balance sheet, or buying weaker banks.

The sources said that at least one bank that applied for funding was denied by the government. As a result, banks that do get money are hoping investors will view the government funding as evidence of good health. At the same time, investors may punish large regional banks that seem conspicuous by their absence from the next round of federal investments.

Talk to us

More in Herald Business Journal

FILE - In this Monday, March 23, 2020, file photo, a worker walks near a mural of a Boeing 777 airplane at the company's manufacturing facility in Everett, Wash., north of Seattle. Beginning in 2024, some 737 planes will be built in Everett, the company announced to workers on Monday. (AP Photo/Ted S. Warren, File)
With 747 out, Boeing to open new 737 Max line at Everett’s Paine Field

Since the last 747 rolled out of the factory, speculation has been rife that Boeing might move some 737 Max production to Everett.

IonQ will open a new quantum computing manufacturing and research center at 3755 Monte Villa Parkway in Bothell. (Photo courtesy of IonQ)
Quantum computing firm IonQ to open Bothell R&D center

IonQ says quantum computing systems are key to addressing climate change, energy and transportation.

Nathanael Engen, founder of Black Forest Mushrooms, sits in the lobby of Think Tank Cowork with his 9-year-old dog, Bruce Wayne, on Friday, Jan. 27, 2023, in downtown Everett, Washington. (Ryan Berry / The Herald)
Growing green mushrooms in downtown Everett

The founder of Black Forest Mushrooms plans to grow gourmet mushrooms locally, reducing their carbon footprint.

Barb Lamoureux, 78, poses for a photo at her office at 1904 Wetmore Ave in Everett, Washington on Monday, Jan. 23, 2023. Lamoureux, who founded Lamoureux Real Estate in 2004, is retiring after 33 years. (Annie Barker / The Herald)
Barb Lamoureux, ‘North Everett’s Real Estate Agent’ retires

A longtime supporter of Housing Hope, Lamoureux helped launch the Windermere Foundation Golf Tournament.

AGC Biologics in Bothell to produce new diabetes treatment

The contract drug manufacturer paired with drug developer Provention Bio to bring the new therapy to market.

FILE - In this file photo dated Monday, March 11, 2019, rescuers work at the scene of an Ethiopian Airlines plane crash south of Addis Ababa, Ethiopia.  The number of deaths in major air crashes around the globe fell by more than half in 2019 according to a report released Wednesday Jan. 1, 2020, by the aviation consultancy To70, revealing the worst crash for the year was an Ethiopian Airlines Boeing 737 MAX on March 10 that lost 157 lives. (AP Photo/Mulugeta Ayene, FILE)
US board says Boeing Max likely hit a bird before 2019 crash

U.S. accident investigators disagree with Ethiopian authorities over the cause of a 2019 Boeing 737 Max crash.

Store owner Jay Behar, 50, left, and store manager Dan Boston, 60, right, work to help unload a truck of recliners at Behar's Furniture on Monday, Jan. 16, 2023. Behar's Furniture on Broadway in Everett is closing up shop after 60 years in business. The family-owned furniture store opened in 1963, when mid-century model styles were all the rage. Second-generation owner, Jay Behar says it's time to move on. (Annie Barker / The Herald)
Behar’s Furniture in Everett closing after 60 years

“It’s time to move on.” The small family-owned store opened in 1963 and grew to cover an entire city block.

Katy Woods, a Licensed Coach, Branch Manager, and experienced Banker at Coastal Community Bank.
Coastal Community Bank Offers Classes for Businesses

To support local business owners and their teams, Coastal offers complimentary Money… Continue reading

Innovative Salon Products online fulfillment employees, from left, Stephanie Wallem, Bethany Fulcher, Isela Ramirez and Gretchen House, work to get orders put together on Friday, Jan. 6, 2023, at the company’s facility in Monroe, Washington. The company began including pay, benefits and perks to its job listings over a year ago, well ahead of the new statewide mandate to include a pay range on job postings at companies with over 15 employees. (Ryan Berry / The Herald)
New state law requires employers to give pay range in job postings

Washington’s new pay transparency law aims to narrow wage gaps based on race or gender — though some companies may seek loopholes.

Paddywack co-owner Shane Somerville with the 24-hour pet food pantry built by a local Girl Scout troop outside of her store on Tuesday, Dec. 20, 2022 in Mill Creek, Washington. (Olivia Vanni / The Herald)
An out-paw-ring of support: Mill Creek pantry feeds pets, day or night

With help from local Girl Scouts, the Mill Creek pet food store Paddywack is meeting the need for pet supplies in a pinch.

Kelly Cameron is the woodworker behind Clinton-based business Turnco Wood Goods. (David Welton)
Whidbey woodworkers turn local lumber into art

In the “Slab Room” at Madrona Supply Co., customers can find hunks of wood native to the south end of Whidbey Island.

Siblings Barbara Reed and Eric Minnig, who, co-own their parent’s old business Ken’s Camera along with their brother Bryan, stand outside the Evergreen Way location Thursday, Dec. 15, 2022, in Everett, Washington. After five decades in business, Ken’s will be closing its last two locations for good at the end of the year. (Ryan Berry / The Herald)
Print it or lose it: Ken’s Camera closes after decades caught on film

The local legend, processing film photos since 1971, will close its locations in Mount Vernon and Everett at the end of 2022.