The Bailout Breakdown
Unless you work in the financial industry, it’s easy to get a headache trying to understand our nation’s financial situation, particularly when it comes to the banking bailout. (I won’t even get started on the automakers.)
In my work this week, I sat down with Jeanne Firstenburg, executive vice president and chief executive officer for First Independent, which has operated in the Vancouver area for 98 years.
Here’s some of what I gleaned from that conversation:
• The “bailout” funds are Troubled Asset Relief Program (TARP) dollars.
• TARP funds can be used only for community lending or to buy out other ailing institutions, Firstenburg said.
• Financial institutions must pay back TARP dollars or expect the government to play a larger role in their business. “This isn’t free money,” Firstenburg said. “You have to assure stockholders you can pay it back.”
• First Independent applied for TARP funds because “it would be imprudent not to,” she said. But First Independent doesn’t qualify for TARP because it’s a Subchapter S corporation (privately held with profits going to members of its holding company, First Independent Investment Group Inc.). And Firstenburg wasn’t enthusiastic taking a bailout even if the federal requirements changed. “If we participate we have to think about all that really means,” she said. “You don’t want to be tagged to a bailout situation.”
• Government purchase of stock in financial institutions could have significant impacts on the nation’s free market economy. “This could change the course of things for very many years in the United States,” she said. “It’s a huge learning time for all of us. We’ll come out of this as better bankers and as a better nation.”
First Independent’s leaders expect tough economic times to last at least another year. Learn more about the bank’s plan to make it through in Friday’s VBJ.
–Charity Thompson can be reached at cthompson@vbjusa.com
