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ICBA Wants TARP Targeted For Main Street

Suggests Improved Community Bank / Small Business Initiatives

Washington, D.C. (December 9, 2009)—The Independent Community Bankers of America (ICBA) today urged the Obama administration to focus the Troubled Asset Relief Program (TARP), which has been extended until Oct. 3, 2010, on helping Main Street community banks continue lending in their communities to fuel job-creating, small business activity—which is vital to our country’s economic recovery.

“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. “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.”

While TARP capital can be leveraged to increase lending, many community banks find that it is expensive and unworkable. Allowing community banks to use TARP capital at more reasonable rates and terms, without onerous rules and restrictions on dividends and warrants, would make it a more viable means to boost lending. ICBA applauds the Bank on Our Communities Act (S. 1822), introduced by Sens. Jeff Merkley (D-Ore.) and Barbara Boxer (D-Calif.), which would allow Treasury to redeploy up to $15 billion in TARP funds to provide matching capital for community banks that pass an internal stress test and commit to providing additional lending to small businesses.

Additionally, ICBA recommends the use of TARP funds for:

  • Extending the Beneficial SBA Enhancements in the American Recovery and Reinvestment Act of 2009. Specifically, ICBA supports extending the SBA fee reductions and higher guarantee levels through fiscal year 2011 and making permanent the SBA secondary market facility authority advanced in ARRA and under the Term Asset-Backed Securities Loan Facility (TALF).
  • Restoring a Reasonable Value to Fannie Mae and Freddie Mac Preferred Stock. Community banks were encouraged by their bank regulators to hold Fannie Mae and Freddie Mac preferred stock as part of their safe Tier 1 capital and were severely injured when Treasury placed these entities into conservatorship in September 2008. As policymakers decide the status of Fannie Mae and Freddie Mac going forward, at a minimum, a reasonable value should be given to these preferred shares based on their par value prior to the Treasury conservatorship action. Importantly, this will help restore capital needed for additional small business lending. For each dollar of value restored, some $7 to $10 in new lending can occur.
  • Allowing the Five-Year NOL Carryback for All Community Banks Through 2010. ICBA applauds the recent expansion of the net-operating-loss (NOL) five-year carryback for 2008/2009 that President Obama signed into law on Nov. 6, and recommends extending it through 2010 and allowing all community banks, including those using TARP capital, to be eligible for the NOL five-year carryback rule. This would help preserve cash flow and to ride out this difficult business environment and to increase lending and economic activity.

For more information, visit www.icba.org.