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http://www.washingtonpost.com/wp-dyn/content/article/2008/12/11/AR2008121103719.html

Treasury To Invest In Ailing Bank - Small, Hawaii-Based Central Pacific To Get U.S. Funds
Washington Post, The (DC) - Friday, December 12, 2008
Author: Binyamin Appelbaum, Washington Post Staff Writer
Central Pacific Financial , a Honolulu bank recently told by regulators that it needed to raise capital to address its financial problems, this week said that it would get the money from an unlikely source: the Treasury Department.

The federal investment is part of the Treasury’s plan to inject $250 billion into financial institutions. Officials presented the program as a way to spur lending and said investments would be restricted to healthy banks.

But the inclusion of Central Pacific shows that the Treasury is investing even in ailing banks that may not be able to expand lending because they need the government’s money simply to cover projected losses. The Treasury has invested taxpayer dollars in all but one of the 25 largest domestic banks, including several that continue to lose money. It has allowed institutions to fund acquisitions and to pay dividends to shareholders. And in the case of Central Pacific , it is bailing out a company that otherwise would need to find investors willing to bet on a troubled bank.

Other institutions ordered by regulators in recent months to raise money failed to do so, forcing several to sell themselves or be seized.

Banking analysts said the decision to spare Central Pacific was particularly surprising in contrast with the one bank that the government has publicly turned away, National City of Cleveland, which was forced to sell itself to PNC Financial of Pittsburgh.

“It has raised a lot of eyebrows,” said Brian Gardner, an analyst with Keefe, Bruyette & Woods. “This clearly wasn’t a bank that was too big to fail. After National City didn’t get [federal] money, why would you give it to” Central Pacific ?

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