New Jersey bank returns money from bailout fund

[April 11, 2009]  WASHINGTON (AP) -- A New Jersey bank has become the sixth bank to repay emergency assistance it received from the federal government.

The Treasury Department said Friday that Sun Bancorp Inc. of Vineland, N.J., repaid $89.3 million, money it originally received on Jan. 9.

The decision by the New Jersey bank followed actions by five others earlier this month. The government has invested almost $200 billion in hundreds of banks as part of the $700 billion financial rescue program that Congress passed on Oct. 3.

Some of the banks returning the money have said they are doing so because they do not need the support and want to avoid congressional restrictions in such areas as executive compensation.

The amount of support payments returned so far totals $442.3 million. The two largest individual paybacks were made by Signature Bank of New York which returned $120 million and Old National Bancorp of Evansville, Ind., which returned $100 million. Both of those repayments were made on March 31.

The money had been provided to the banks in the form of purchases of bank stock by the government. The hope was that the government money would bolster banks' balance sheets and allow them to resume more normal lending.

Some economists have expressed concerns that the push by banks to return the aid earlier than planned could undermine the government's efforts to boost lending, especially if less healthy banks begin to feel pressure to return their funds.

The entire rescue effort has come under heavy criticism with many lawmakers arguing that the Bush administration failed to impose enough restrictions on the program to make sure the money being provided would go to increasing bank lending to consumers and businesses.

[Associated Press; By MARTIN CRUTSINGER]

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