WisBusiness: Associated Bank leader says fed money an investment, not a bailout

By Samantha Hernandez

For WisBusiness.com 

A leader of one of Wisconsin’s biggest banks said today that she would not call the current economic and financial situation a “crisis,” but she said that the country is in extraordinary times.


“We are at a historic level of financial disruption and an unprecedented level of policy response,” said Lisa Binder, president and chief operating officer for Associated Banc-Corp.


Binder discussed the federal government’s involvement in the banking system during a Milwaukee Rotary Club luncheon today. Binder, who has been with Associated Banc-Corp since 2007, focused part of her talk on describing the U.S. Treasury’s Capital Purchase Program, which her bank used to sell $525 million of senior preferred shares and related common stock warrants to the government.


“The idea of the CPP was to build capital to increase the flow of financing to businesses and consumers,” Binder said. She said that banks had been trying to preserve their capital ratios by reducing lending.


The CPP program was not a bailout, she said, but an investment for the government and a way to provide greater liquidity and encourage banks to lend. The banks are expected to pay a 5 percent dividend yield for the first five years and 9 percent after that.


“Is the CPP a bailout or isn’t it? Well, as designed it is not a bailout. That would be synonymous with saying any investor that invests in a company would be bailing you out,” Binder said. She said that investors invest with the expectations of seeing a return.


Associated Bank participated in CPP because it was asked to by its regulators and it was the right thing to do, Binder said. CPP helped Associated by providing greater liquidity and more lending power, she said.


“Our colleagues assisted more than 1,000 customers, without government intervention, in refinancing their mortgage loan and getting assistance,” Binder said.


Binder said that if a bank is not healthy to begin with, the capital would be burnt up covering its losses. She said Associated was in good shape.


“Associated was profitable last year and continued to be profitable every quarter of the year. And [Associated] has announced that we have no intention of reducing our dividends,” Binder said.