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Wis. businesses say banks stingy with TARP funds

MILWAUKEE (AP) — Local banks have been stingy with their bailout funds, endangering small businesses that otherwise have the means to survive, business owners told a congressional panel Wednesday.

A number of bank executives countered that their banks have increased lending in the past six months and remain committed to helping businesses and consumers.

The comments came before the Congressional Oversight Panel, a five-member committee created to oversee spending of the Troubled Asset Relief Program, or TARP. The $700 billion rescue program was designed to stabilize the financial sector and unclog credit markets.

But critics have complained that the bailout money has failed to get banks to resume normal lending to consumers and businesses. Increased lending is seen as vital to ending the financial crisis.

Thomas Klink owns Jefferson Electric, a Franklin-based company that makes transformers for small appliances. He told the panel in prepared remarks that he won a large contract recently, but his bank reneged on a loan he needed to help his company grow. Other banks also reacted skittishly to his requests, forcing him to close a Texas plant and move production to the company's plant in Reynosa, Mexico.

"It appears from Jefferson's viewpoint that little or no relief has been afforded as a result of the TARP funding, whether lenders have accepted funds or not," Klink said.

A statement from Crosstowne Machining, a Muskego company that makes parts for heavy machinery, told a similar story. The company had strong 2008 earnings, but when sales sagged in 2009 it couldn't restructure its debt or get more working capital, it said.

Initial meetings with seven banks "were very positive ... but when the business bankers 'ran it up the flagpole' at their respective banks, the responses were not good."

Several bankers insisted they were committed to funneling cash into their communities.

Peter Prickett, the president and chief executive of First National Bank-Fox Valley in Neenah, said in prepared remarks that his bank made 191 loans to new customers for more than $40 million, and another 128 loans to existing customers for more than $21 million, in the past six months.

"Our underwriting standards have not significantly tightened," said Prickett, whose parent company received $4.8 million in TARP funds. "... (E)ach business customer is evaluated on their unique needs and prospective ability for repayment."

Treasury Secretary Timothy Geithner said last week that worries about the economy and the crushing weight of bad loans and other toxic securities had made banks cautious in lending and were holding back economic recovery.

The oversight panel conducted similar listening sessions in recent months in Nevada and Maryland. It held Wednesday's panel at the University of Wisconsin-Milwaukee because it said the region is particularly vulnerable to tighter credit restrictions on small businesses.

Unemployment in Wisconsin has reached its highest rate in 26 years, hitting 9.4 percent in March. That surpassed the national rate of 9 percent and amounts to about 290,000 people without jobs.