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ICBA Urges Steps to Improve Economic Stabilization Participation

Washington, D.C. (Nov. 18, 2008)—The Independent Community Bankers of America (ICBA) today urged policymakers to take needed steps to maximize participation in Emergency Economic Stabilization Act programs. While thanking Congress and administration officials for acting quickly to address the current economic crisis, ICBA outlined ways to improve the Troubled Asset Relief Program’s Capital Purchase Program (CPP) and the FDIC’s Temporary Liquidity Guarantee Program to ensure widespread participation.

“ICBA commends the extraordinary efforts of the Congress, Treasury, the Federal Reserve and the FDIC to address the current economic crisis,” Cynthia L. Blankenship, ICBA chairman and vice chairman and chief operating officer of Bank of the West, Grapevine, Texas, said in testimony to the House Financial Services Committee. “Our nation’s more than 8,500 community banks continue to stand ready to help our country recover, and in order to get more dollars flowing to Main Street and to boost economic activity as Congress intended, a greater number of interested community banks must be part of the CPP.”

ICBA said it is critical for Treasury to quickly release details on how banks that are not publicly traded or do not issue preferred shares can participate in the CPP. Currently, thinly traded and Subchapter S Banks, as well as mutual institutions, are awaiting guidance on the program.

ICBA also said the FDIC’s Temporary Liquidity Guarantee Program deposit insurance guarantee for transaction accounts will enhance depositor confidence in community banks and free up bank capital. The guarantee program for senior unsecured debt, however, provides few benefits for community banks. ICBA has suggested the FDIC adopt risk-based pricing for the guarantee, so it will be more attractive for overnight transactions. In addition, the agency should ensure that bank holding companies with substantial non-bank subsidiaries help pay for any net costs of the program if they are allowed to participate.

Blankenship told the panel that community banks will continue to work to keep mortgage borrowers in their homes, including loan modifications under the Hope for Homeowners Program. “Community banks played no role in causing the current problems because they did not engage in the subprime lending practices at the heart of the crisis,” she said. “Community banks are truly invested in long-term relationships with their customers and their communities.”

Read the full testimony at www.icba.org.