Small Banks Still Owe Government $2.7 Billion for Bailouts

Friday, 27 Sep 2013 08:23 AM

By Dan Weil

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While the country's biggest banks long ago paid back the bailout investments made by the government during the 2008-09 financial crisis, small banks are still in arrears.

A total of 113 small to mid-size banks owe the Treasury Department about $2.7 billion, according to The Wall Street Journal.

Treasury would like to be unburdened of its stakes in the banks, but they're too weak to make it without the capital, the paper reports.

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So as big banks thrive, some smaller ones, especially those with a lot of commercial real estate loans, continue to struggle. A total of 79 are $217 million behind in interest and dividend payments to the Treasury, according to The Journal.

The department is seeking to sell many of its bank stakes to investors such as hedge funds and private equity firms, even if it has to take a loss, the paper reports.

"There are some institutions that we don't think can repay," Timothy Massad, assistant Treasury secretary for financial stability, told The Journal. "We don't want a financial system that is owned by the government."

Some small banks, even if they didn't need bailouts, are now suffering from the additional regulation imposed on the industry to prevent another financial crisis, bankers say.

That has increased the pressure on small banks to sell out to larger ones, they tell the Los Angeles Times.

"Regulatory burden is absolutely a factor for many smaller banks that are looking to exit," Steven Gardner, president of Pacific Premier Bank in Irvine, Calif., which has acquired four banks in the past two years, told the paper.

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Related Stories:

TARP Inspector General: ‘Too Big to Fail’ Banks Are Still a Problem

Fed's Fisher Urges Bank Breakup Amid Too-Big-to-Fail 'Injustice'

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