Two of the East Coast’s largest banking institutions are lining for the federal bailout.
First, there’s Suntrust:
SunTrust Banks, metro Atlanta’s largest bank by deposits, said Monday that it would sell $3.5 billion in preferred stock to the U.S. government in an effort to weather the current economic storm and enable the bank to explore new lending opportunities as well as potential acquisitions.
The stock sale is part of the U.S. Treasury’s $250 billion program to stabilize the nation’s financial system by pouring cash into national and regional banks.
The move “enhances SunTrust’s already solid capital position and will permit us to further expand our business and take advantage of growth opportunities,” SunTrust Chairman James M. Wells III said in a statement. “In addition, we are pleased to support the Treasury in its ongoing effort to address dislocations in financial markets and spur the market stabilization that is in the public interest.”
SunTrust also announced that it would be reducing its dividend by 30 percent, to 54 cents per share.
Wells said he anticipated “prudent deployment” of the new capital, including an expansion of “careful lending” and other initiatives.
But, Wells said, “as long as the current uncertain and challenging economic environment persists, maintenance of capital at elevated levels is desirable.”
SunTrust’s stock was down nearly 4 percent in morning trading to $33.79 per share. The bank’s market capitalization is $12.4 billion.
Then, and most dismayingly, there’s BB&T:
BB&T Corp. said Monday said the Treasury Department gave preliminary approval for it to receive financing as part of the government’s $700 billion bailout of the nation’s troubled financial institutions.
The Winston-Salem, N.C., bank said it will receive $3.1 billion. In return, the government will get preferred shares that will pay a 5 percent annual dividend rate for the first five years. The payout will increase to 9 percent in the subsequent five years, unless the government redeems the stock. The Treasury will also get 10-year warrants to buy BB&T common shares.
The financing will boost the bank’s capital ratio, which is a measure of its stability. Many banks have seen that ratio fall sharply as the value of loans on their books declines.
The government program aims to give banks enough money so they will increase lending to each other and to other businesses, unlocking the credit markets that have slowed economic activity.
BB&T’s chairman John Allison had previously spoken out against the bailout in a letter to Henry Paulson. Additionally, in the wake of 2006’s Supreme Court decision in Kelo v. City Of New London, BB&T had announced that it would no longer provide funding to commercial developers who build on land taken from private property owners by eminent domain and had also made a $ 1 million donation to a North Carolina college to promote the works of Ayn Rand and other libertarian-oriented thinkers.
This time around, Allison seemed quite okay with signing on to the government’s latest scheme:
CEO John Allison said he supports the government’s efforts to stabilize credit markets and restore confidence in the financial system by injecting new capital into banks. Allison has said BB&T may use part of its new capital to fund acquisitions.
“For us, the additional capital will not only extend and strengthen our lending capacity, but provide other strategic options as well,” Allison said.
BB&T’s decision, in particular, is disappointing but they are a business with responsibilities to shareholders, and when the government puts a pot of money in front of them it’s not surprising that they’d say yes.
October 28th, 2008 at 9:25 am
I’m not so quick to damn BB&T for hypocrisy, in the same way that I don’t damn young libertarians for accepting federally subsidized student loans.
If you didn’t write the rules, then you shouldn’t be summarily damned for playing the game anyway.
October 28th, 2008 at 9:52 am
Henry Paulson / Goldman Sachs tax liens
Scattered from California to New York: The judgments from the Department of Labor, tax liens against 401-K plans, state tax liens, mechanics lien, judgments from other companies
webofdeception.com
Live links to Goldman Sachs Tax Warrants
http://webofdeception.com/paulsongoldmanliens.html#goldmanlinks
October 28th, 2008 at 2:23 pm
Allison did not write a letter to Paulson but to every single congressman/ woman stating why the bailout was a bad idea and what he thought should have been done instead. That being said, the bailout was passed and money is being doled out to all banks deemed “healthy”. How would BB&T be able to compete with other banks (like Sun Trust and PNC) without going along? In the end BB&T couldn’t let its competitors have such a massive advantage over it. As it is PNC is on a shopping spree.
November 12th, 2008 at 11:41 am
If these banks were really interested in “solving” the crisis, they would offer to LOWER THE INTEREST RATE on the mortgages and loans they have in their portfolios. BB&T just told me my loan was “written in stone and cannot be changed”, even though I have indicated a willingness to make the principle payments and interest that would be within my new budget ability. It is easy to make public statements, but the “proof is in the pudding”, as the old saying goes. Let me see an offer to adjust all loans to no more than a 5% interest rate and then I’ll believe Mr. Allison!
December 7th, 2008 at 1:57 pm
Howard,
Actually, last I looked we do have mortgage rates around 5%. Have you tried to re-fi? Not to sound cold, but you signed a contract with the bank to pay the loan back at X interest rate. The bank sold deposit products with that rate in mind. It isnt the bank’s responsibility to fix your mess. Would it be fair for the bank to recall interest paid to depositors because you cant pay the rate you agreed to? It isnt MY responcibility as a tax payer to pick up after you either. Personally, I think the bail out was 100% wrong. But, the government has forced companies like BB&T to take the funds in order to stay competitive. Seriously, the whole thing makes me sick!
December 20th, 2008 at 1:36 pm
OF SLIPPERY SLOPES AND CAMEL’S NOSES:
Many trends, both good and bad ones, are reversible. Authoritarian governments, like China’s throughout the past five thousand years, have been able occasionally to re-invent themselves, stave off Decline, and achieve progress.
Democracies are much less able to make such come-backs. Come-backs require discipline and iron will, the stuff of dictatorial leaders. Over time, strong Republics usually morph into democracies and then into populist governance, and the citizenry become spoiled by all their new “rights.” They no longer are content to merely be free–they want to be free from work.
The process is seductive, if you recognize human nature. Once offered a subsidy, few will willingly give it up–that is the slippery slope of “excess compassion.” And those that profit most from excess compassion are those who administer the hand-outs. They can set their own pay, boost their health benefits, and tell everyone else how to live their lives. They can even let their cromies make fortunes by selling worthless mortgages to Fannie-Mae and Freddie-Mac!
Those non-productive elites of properous nations will normally agitate for every type of government program–to give themselves a role at the top. They are like the camel, with its nose just itching to get into the common man’s tent. They seek to enter so they can re-distribute his wealth. They don’t care as long as enough rubs off to pay their salaries and expenses.
Unfortunately, as their “compassionate offerings” expand, the problems and misery of the people rise to fill the supply of federal hand-outs. And, where the supply is unlimited, the demand becomes unquenchable, until every citizen is “hooked” and thoroughly addicted.
Reversing such decadence by popular control has historically proved impossible. Once the central government replaces the independent self-reliance of a people with victim status the voters will certainly reject any cold-turkey cure. Once half the population is living off the other half, as it is today in America,there is no turning back.
This year, even America’s once great auto makers and savings banks have been seduced. Maybe it is time for us all to fake a knee injury, go on disability, leap on the slippery slope, and join the happy throng in the arms of our Big Government. Maybe our grandkids can go to China and start a new business!