Stephanie Brien
The Journal Times
March 6, 2009
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RACINE — As it turns out the bank bailout isn’t really a bailout, at least that is the way Johnson Bank officials feel.
Johnson Bank announced Thursday that it will not accept $100 million in federal funds from the Troubled Assets Relief Program launched in October, intended to help build capital and increase the flow of financing.
“Contrary to the perception some have that this is a bailout, I think to the contrary, this is capital that is rather expensive,” said Richard Hansen, President and Chief Executive Officer of Johnson Financial Group.
The cost of paying the money back is too high, with too many regulations attached, and the company doesn’t need it, Hansen said.
Basically, the government wanted to buy $100 million in stock and sell it back in five years at the future value, plus other factors, Hansen said. He said the money may have cost the company as much as $11 million per year, when combining interest, appreciated value of stock and the elimination of certain tax discounts. Then, once the company entered into the agreement, he said, the government could change the agreement at any time.
“At these terms and at these costs, that was not a bailout. The government will make a lot of money on it,” Hansen said.
They put a lot of thought into the decision, Hansen said, but even if they would have accepted the money it would have been hard to keep funds liquid to repay the federal government in five years.
On top of that, Hansen was also concerned accepting the money could paint a negative picture of the company.
“The public perception of, is it fair, is it right, is very weighing,” Hansen said. “The impact that it might have had on our brand was concerning.”
The $100 million would have allowed Johnson Bank to make more loans, Hansen said, but he said the bank already had capital that it is lending out now. He said the total number of loans the bank is giving out is not as high as past years mostly because fewer people and business don’t want to borrow right now. But, from December to February, the bank has made more loans for home mortgages than it has at any other time in the history of the bank, he said.
Johnson Bank is the part of Johnson Financial Group, one of the locally-based Johnson family of companies.
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