Q. How many Connecticut banks do you expect to ask for part of the $700B bailout money, and what size range banks are most likely to participate?
A. I expect a good handful of them to take the capital being offered by Treasury. For the first five years the capital costs 5 percent which is a good price to pay. Both large and small institutions will apply for the capital.
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Q. To what extent will that injection of federal money fuel banking consolidation in Connecticut.?
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A. It’s my hope that capital acquired from the federal government by institutions participating in TARP (Troubled Assets Relief Program) will be used to make commercial and other consumer loans to the many Connecticut businesses and consumers needing funding and provide stimulus to economic activity and our economy. Capital from TARP was not meant to fund acquisitions because that would provide no benefit to the consumer/taxpayer.
Q. In recent months, deposits have flowed in to Connecticut community banks and credit unions. How are they putting that new money to work (what kind of loans, new investments)?
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A. Community banks will likely use this capital to fund loans to businesses and consumers. Also, investment strategies may include short term investments to employ the funds while waiting to be lent out.
Q. Was the Fannie/Freddie preferred shares a one-quarter write-off problem, or are there lingering effects?
A. It is a one quarter loss event, however, the broader issue is when, if ever, will the securitization market recovery take place. Confidence in these type investments is at an all time low and restoring it may be very difficult.
