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Friday, Jul 12, 2024

Perspective From Head of a Small Bank

By CARL RAGGIO Following are some thoughts from local bank executive, Carl Raggio, president of Western Commercial Bank in Woodland Hills, in response to national news media reporting on the banking industry. Toxic Asset Relief Program To date, the U.S. Treasury Department has advanced about $301 billion in TARP funds to 391 institutions: $125 billion went to the top nine financial institutions (now eight) initially and another $80 billion in subsequent funds went to that same group and AIG Insurance. That leaves about $96 billion which has been distributed to the 381 other banks. There are slightly more than 8,000 banks in the country. Hence, only about 5 percent of all banks in the U.S. have received TARP. Further, many of those institutions have only recently received the funds. Treasury recently identified a program used to stress test those banks with assets of greater than $100 billion in other words, the top 60 banks in the country. When the press and Treasury are discussing the toxic assets on the banks’ books, those assets they are speaking of are lodged with primarily those 60 banks, not the other 7,940 banks. Executive Compensation There is considerable rancor in Congress about the excessive bonuses and salaries received by bank executives. While I do not have a survey for the entire U.S., and certainly not for Wall Street, I do have data for the state of California: CEO salaries for all California banks falls generally between $250,000 and $400,000 annually. It would seem logical, based on the cost of living in California, that the median for bank CEO’s throughout the U.S. is lower. The salary issues are a Wall Street problem, not a Main Street bank problem. Community banks are being touched by the problems in the economy and have continued to support their respective markets. However, the community banks were not the source of the problem.

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