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Struggling banks need government help, trade group says

Administration officials say that Congress must agree to eliminate conditions such as limits on executive compensation in order for the program to succeed in attracting banks. They say that hundreds of smaller banks decided not to take aid last year because of the stigma and strings attached to the original bailout.

The volume of small-business lending by smaller banks declined by about $8 billion, or 2 percent, from September 2008 to September 2009, federal data show.

But bank executives and industry representatives say that the program does not address key reasons for the decline. Many banks have plenty of money, but they are chastened after the excesses of recent years. Regulators also are urging banks to exercise greater caution. And fewer customers are seeking loans.

Fine said the program still could help a group of banks that need additional capital to return to health and start lending again.

"I have insisted that one of the features of this program that they send over to Congress would be to allow less well-capitalized banks entry into this program," Fine said. "There are hundreds -- between 700 and 1,000 banks out there that could really use this kind of program and, in order for this program to succeed, those banks are going to have to get permission to participate."

But Frank Sorrentino III, chief executive of North Jersey Community Bank, said he did not want the government to give money to weaker banks. He said his company raised $9 million from private investors in December to support expanded lending.

"If there are banks that can't raise capital on their own, maybe there's something wrong there," Sorrentino said.

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