It can’t hurt to help shore up confidence in America’s banking system, but it’s too early to tell whether the plan will actually work, local bankers said hours after President Bush announced the latest bailout proposal Tuesday.
“It’s a fascinating turn of events,” said Bruce Alexander, president and chief executive of Vectra Bank Colorado. “Intellectually, it makes great sense to allow access to capital to open up the locked credit markets.”
Bush’s announcement of a $250 billion plan for government to directly buy shares in the nation’s leading banks has much to be positive about, bankers said.
“In general, we believe the Treasury’s plan is a positive step toward providing much-needed capital for financial institutions that are in the best position to deploy it effectively to stimulate the U.S. economy and strengthen confidence in the U.S. banking system,” said Don Marshall, Wells Fargo’s regional president for the Denver metro area.
That some of the initial nine participating banks — Wells Fargo among them — had to be pressured into the plan, mostly because they didn’t need the capital, met with some measured concern.
“Most banks would elect not to participate if they can avoid it, and if they’re in it will want to do it slowly,” Alexander said.
Still, bankers say the overall impact on consumer confidence in the system is a big unknown.
“It’s still too soon in the game to think about the impact,” said Jennifer Saltzman, vice president of the Colorado Bankers Association. “It’s not going to be instantaneous to know if it’s a good idea.”
The Bush administration promised its involvement would be temporary and was intended only to shore up consumer confidence.
Smaller banks that are well capitalized aren’t concerned since any benefit will surely mean sharing the prosperity.
“We’re obviously not involved since we’re in pretty good shape, but even though we’re not a direct beneficiary, anything that stabilizes the banking industry is helpful,” said John Ikard, president of First Bank Holding Corp. “Stability in the larger banks definitely trickles down to us.”
Worries about government ownership in private banks it regulates is merited, Alexander said, “But once the banks become profitable and have their capital resources, they have the incentive to buy those shares back.”
“I can see why it would be criticized,” he said. “They don’t want the government in their business, but that’s the incentive to get it out.”
David Migoya: 303-954-1506 or dmigoya@denverpost.com
