Two banks vow to turn bailout into loans

WASHINGTON, Oct. 31 (UPI) -- Two U.S. banks have said they would put a substantial amount of their federal bailout assistance funds into circulation as loans in short order.

"We do expect to start deploying it almost immediately," Chief Financial Officer Doyle Arnold at Zions Bancorp in Salt Lake City told The Wall Street Journal.

The comments were published the same day as House Financial Services Committee Chairman Barney Frank, D-Mass., said companies receiving bailout funds would violate the law in they apply the funds to any other purpose than to ease lending, The Hill reported.

"I am deeply disappointed that a number of financial institutions are distorting the legislation that Congress passed at the president's request to respond to the credit crisis by making funds available for increased lending," Frank said. "Any use of these funds for any purpose other than lending -- for bonuses, for severance pay, for dividends, for acquisitions of other institutions, etc. -- is a violation of the terms of the act."

Frank has scheduled November hearings on the federal rescue program, The Hill said.

Zions is scheduled to receive $1.4 billion through the Troubled Asset Relief Program, a $250 billion program within the $700 billion rescue package referred to as TARP.

The bank plans to put "several hundred million dollars" into circulation by the end of the year, Arnold said. In 2009, the bank expected it would loan about $750 million per quarter.

Webster Financial Corp. of Waterbury, Conn., intends to lend "every single dollar" it receives from the government, Chief Executive Officer James Smith said.

Smith said it was "the right thing to do."

Lending at the 24 banks participating in the program declined 0.3 percent in the third quarter to $3.8 trillion, the Journal said.

Joe Jernigan, chief financial officer at Andrews Distributing Co. in Dallas recently tapped eight firms for a $230 million financial package. "Some of the banks we approached were in a precarious position from a capital standpoint," he said.