Four Banks Are First to Return U.S. Aid; Early Repayments Could Hurt Lending
Four regional banks from around the country yesterday became the first firms to repay emergency aid from the government, but the show of strength also underscored concerns about the health of a key element of the federal economic recovery program.</br></br>The Treasury Department has invested almost $200 billion in more than 500 banks to support new lending to consumers and businesses, but the growing clamor among recipients to repay the aid earlier than planned threatens to diminish the impact.</br></br>The largest bank to exit, Signature Bank of New York, which returned $120 million, said it was acting to avoid the effects of congressional restrictions on aid recipients, including limits on pay that could drive away its most productive employees. Chief executive Joseph J. DePaolo also said that the aid had become an undeserved scarlet letter because of public perception that the program was being used to save troubled banks, rather than buttressing healthy firms.</br></br>Other returns included $100 million from Old National Bancorp of Indiana, $90 million from IberiaBank of Louisiana and $28 million from California's Bank of Marin Bancorp.</br></br>The repayments are the latest challenge for the investment program, which was introduced in November with the stated goal of investing $250 billion in thousands of banks. The Treasury immediately put half the money in the largest banks but since has distributed less than 60 percent of the remaining funds.