Nationwide, about 210 banks, thrifts and credit unions will be eligible to receive money from the program. How many of these institutions will take advantage of it is unclear, but administration officials indicated they are hoping for widespread buy-in.
Secretary Geithner began consulting last October with members of Congress and officers of community banks, thrifts and credit unions that focus on low- and moderate-income communities, according to administration officials. Based on the feedback Geithner received, he realized that different terms would be needed for small community banks, thrifts and credit unions.
The Treasury Department expects these funds to be used by small businesses, as well as for community needs such as child care centers, charter schools and housing. This program is separate from the $30 billion small business program announced earlier this week.
Administration officials explained during Wednesday's briefing that the program will have five components:
- Capital will be available at a 2% rate to eligible banks and thrifts. They can apply for capital equaling up to 5% of their risk-weighted assets.
- Credit unions will be eligible for capital at the 2% rate, but only up to 3.5% of total assets.
- Community development financial institutions will need to raise private capital to qualify for the program, and the private capital must be junior to the Treasury capital.
- Community development financial institutions can transfer the money they've already taken under original TARP terms to these more favorable terms. Original TARP funds required dividend payments of 5%.
- Community development financial institutions will not be required to issue warrants, as were required originally under TARP.
Many of these financial institutions have been serving their communities for decades, providing loans when no one else would lend in those areas. Now, they can play a critical role in making sure their communities aren't left behind as the country recovers from the Great Recession.