Developer Seeks TARP Answers

TAMPA, FL - Developer Donald Phillips wants to know why millions of dollars in federal bailout funds to banks has yet to make it into the hands of borrowers. To answer that question, Phillips has organized the Florida TARP Forum to discuss the use of the first funds allocated under the $700 billion Troubled Assets Relief Program created in October.

Phillips has invited business leaders and elected officials, along with representatives from major regional banks and regulators from the Federal Deposit Insurance Corp. and the Federal Reserve. By getting everyone together at one time in one location, he's hoping to gain a better understanding of the use of TARP funds.

Bankers are having trouble getting clarity on these issues, said Phillips, managing director of Phillips Development and Realty LLC. They're told to stimulate the economy by lending, but they're also told to post additional reserves for potential losses on loans considered good credits just a few months ago, Phillips said. As a result, he said, bankers are just "sitting tight."

Organizing the forum is more than an intellectual exercise for Phillips, whose own company, which builds multifamily rental communities, has come up against lenders walking away from commitments. Developers borrow from banks in two parts, first for land acquisition and then for constructions, Phillips said. "We acquire land based on forward statements of lenders, and they'll go so far as to fund the land loan," Phillips said. "We will deploy capital and make commitments, but when it comes time to draw on the development funds, the statements we've heard recently are, 'We are declining the opportunity to pursue the balance of the transaction.' "

Foreign banks and those that don't qualify for TARP lending have been more aggressive about lending and he's received some commitments from them. But privately owned smaller community banks can only loan up to a couple of million dollars, well below the amount he needs. He did not identify his lenders.

Even as Phillips was organizing the forum, the FDIC began demanding state-chartered banks show how TARP and other federal funds are being used. The FDIC said Monday it expects the banks to "deploy funding received from these federal programs to prudently support credit needs in their market and strengthen bank capital."

TARP funds are considered capital because the U.S. Treasury purchased preferred stock and warrants in the banks that received TARP funding. Capital fuels growth, but it's up to each individual bank as to how they use the money to fuel growth, said Ken Chevren, president and CEO, First Community Bank Corporation of America (Nasdaq: FCFL) in Pinellas Park, one of just two Tampa Bay area banks to receive TARP funding.

First Community is willing to lend, Chevren said. "The biggest challenge in lending now is a lot of customers don't have the same income they used to have and the collateral values have declined, so they don't qualify," he said, adding that increasing reserves to prepare for problem loans is "the prudent thing to do."

Everyone wants banks to be stable, Phillips said. "If we can determine the first round of stimulus money simply shored up the banks … and we agree to focus on the next round and how to get that money to the ground and provide the stimulus, so be it."