Wednesday, March 18, 2009

Your Stimulus At Work

Yahoo Finance columnist Laura Rowley has an example of how TARP was supposed to work: Banner Bank.
Banner Bank, a 16-branch institution based in Walla Walla, Washington, received $124 million in TARP funds last November, in exchange for giving the Treasury preferred stock with a 5 percent dividend. Last weekend Banner launched a program offering 30-year, fixed-rate mortgages at just below 4 percent to buyers who put 20 percent down, and 4.875 percent for 30 years with no money down.

Buyers had to choose from an inventory of 243 homes offered by 75 builders currently financed by Banner and its subsidiary, Community Financial. In the first weekend of the program, builders sold 25 of the homes, priced from $184,000 to $2.5 million. (The offer ends March 22.)

I suspect this was one of the "Good Banks" that were asked to take the money when they didn't need it. And since they didn't need it, they decided to use it for the purpose intended.
"We think it's an effective way to utilize TARP funds and create a positive atmosphere surrounding home-purchase activity," says Banner CFO Lloyd Baker, adding that the bank hopes to lend $50 million under the program. It will also be offered in Seattle and Boise, Idaho.

Banner doesn't expect to profit on the mortgages, which include jumbo loans. Rather, it was looking for a way to jumpstart activity for its builder clients. The bank, which is well-capitalized, had almost $190 million in non-performing loans last year, 80 percent of which were residential construction and development loans.

"It doesn't serve our communities to drive by and see vacant houses -- nobody wins," says John Satterberg, president of Community Financial. "With this program, the homebuilder sells a home, the consumer gets a low interest rate, it gives the builder the opportunity to start another home, which puts the rest of the economy to work -- the excavator, the concrete company, the framer, plumber, electrician. That's what is gone from our economy."

Well, the homebuilder may decide to sit it out for awhile until demand comes back, but still. When homes start selling again it's bound to have a positive impact, even if it takes awhile.

The house across the street from us has been for sale for over a year and a half. It finally sold, though I have no idea how much they had to come down on their price. Someone from my church who works for a custom closet organizer company has said that business has picked up a touch again.

New home starts were up last month. It would be nice to think that things may be starting to turn around. If so, it'll probably be because of smaller banks like Banner being willing (and able) to do their part.

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