Not immune from recent economic woes, some Wisconsin banks may soon apply for aid under a temporary federal relief program, Wisconsin Bankers Association CEO Kurt Bauer said Monday.
The relief is structured through the Troubled Assets Relief Program, which is run by the U.S. Treasury Department. Among other things, it has facilitated the purchase of stock by the federal government in some private banks.
According to Bauer, between 10 and 15 percent of Wisconsin banks may apply for TARP relief. In an interview conducted by Wisbusiness.com, he said the WBA encouraged all member banks to at least look at the program.
Michael Mach, administrator at the Department of Financial Institution’s Division of Banks, said the application for relief by some of Wisconsin’s biggest banks does not imply the banks are facing serious problems.
“It [applying for TARP aid] is probably not an indication that banks are in trouble,” he said. “That said, I think it will take time to see how effective it is.”
Mach mentioned that while banks in Wisconsin are not at their healthiest levels, they are generally more stable than the national average.
“It won’t be as bad here as in other places, but we will still see some problems going into the next year,” he said.
Mach added that housing foreclosures are a good indicator of how healthy state banks are.
Wisconsin is ranked 29th in housing foreclosures in 2007, but states such as Arizona, Nevada and California have been hit particularly hard. Subprime mortgage foreclosures are widely seen as a contributing factor to the recent economic crisis.
Scott Becher, chief of staff for Rep. Steve Wieckert, R-Appleton, said the application for aid is important to maintaining a healthy banking industry in the state.
“It is imperative that we have a strong banking system in the state,” Becher said. “The good news is I think Wisconsin’s economy as a whole has performed better than the rest of the country.”
Becher also rejected the idea that the applications for TARP indicated those banks were in jeopardy and agreed with Mach’s claim that Wisconsin has and will fare better than much of the nation.
The U.S. Treasury Department’s website describes TARP as “a voluntary capital purchase program to encourage U.S. financial institutions to build capital to increase the flow of financing to U.S. businesses and consumers and to support the U.S. economy.”
Becher and Mach, along with other observers, have been careful not to classify the application for aid as a bailout, rather an opportunity for banks to mitigate temporary losses.
Some of the biggest banks in Wisconsin have announced intentions to apply for TARP aid, including M&I and Associated Bank. Large banks outside of Wisconsin, such as U.S. Bancorp, have already signed up for the program.
Officials for the Wisconsin Bankers Association were not available for comment Monday.
