Small banks in US bailout pool under pressure

More than 100 smaller banks were able to tap government programmes to pay off bailout money they received during the financial crisis but those still owing face a perilous future, a federal watchdog said on Wednesday. In its latest quarterly report to Congress, the Special Inspector General for the Troubled Asset Relief Program, known as SIGTARP, noted that as of March 31 there were still 351 regional and community banks in the bailout program. Banks had to agree to give the Treasury Department an ownership interest in the form of preferred stock and warrants to buy more stock as a condition of receiving bailout money. They have to buy the stock back to exit the program. SIGTARP noted that 137 banks were able to refinance out of the bailout program by using money they received through another program, the Small Business Lending Fund, which was set up in 2010 to let the Treasury make capital investments in banks and so boost credit availability for small businesses. The report notes that the hundreds of banks left behind, still owing bailout money, are mostly smaller and they face a new risk because dividend payments that they are required to pay the government nearly double in late 2013 to 9 per cent from 5 per cent.