The Herald Bulletin

Morning Update

Annual Report: Business & Industry

March 29, 2010

Stimulus programs spurred business in 2009

Professor: Long-term effects remain to be seen

ANDERSON, Ind. — Federal government programs were the talk of the business world in 2009, from banks receiving funds to shore up lending to car dealers swamped with “Cash for Clunkers” deals.

Whether the programs will have a long-term effect on the economy remains to be seen, said Anderson University Associate Professor of Management Wendell Seaborne.

“I don’t know if we can make that judgment yet,” Seaborne said. “Short-term they did do some sales. I don’t know what the long-term impact will be. That’s probably true of about any of the programs instituted in the last couple years.”

One of the most widely used government programs associated with the federal stimulus package passed in 2009 was the Troubled Asset Relief Program, in which the U.S. Treasury bought shares of troubled banks to free up money for the banks to lend to consumers.

Seaborne said while TARP undoubtedly propped up banks while it was in effect, he could not tell what the long-term effect would be. Three banks with branches in Madison County received TARP funds, including Old National, MainSource and First Merchants.

Old National repurchased all the $100 million in preferred stock that was sold to the U.S. Treasury in December 2008, bank spokeswoman Kathy Schoettlin said. The bank also was the first to repurchase a warrant for its 813,008 shares of common stock, another phase of TARP.

As of early March, MainSource had not repaid any of the $57 million it received, and First Merchants still was waiting to determine when it could begin repaying its $116 million.

Treasury Secretary Tim Geithner said in a statement to Congress that one year after the institution of TARP, the financial impact to the country was expected to be $120 billion; when the program was announced, the impact was expected to top $550 billion.

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Annual Report: Business & Industry
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