Anchor Sells a Big CD

I read Saturday's news on Sundays. I see "Anchor to get federal cash" (WSJ Jan 10) and realize we have a TARP participant in our back yard. It might be interesting and fun to watch this closely and see how a large local institution behaves with government funding.

Did you see the terms? 110 million in preferred stock at 5%. It is likely convertible to common stock, though CFO Ringgenberg did not disclose what those terms are in the article. This will presumably let Anchor expand credit to "qualified consumer and residential loan customers." How many qualified customers can't get loans in our market today? GM says you now only need a FICO of 620 to get a car loan.

What was more interesting was the statement that it will provide "greater latitude in its efforts to work with troubled but qualified borrowers." Think carefully about that statement. It says that government ownership of stock corporations based on artificial terms and rates will allow an institution to better work with troubled borrowers.

What I see is a partnership forming between federal politicians and financial institutions that may redefine how an institution is valued. When does the Treasury convert the stock if Anchor cannot perform at a level that satisfies its owners? How does the Treasury vote its stock?

Is someone willing to model the possible outcomes with Foresight? Do we have enough public data to build a simple model, and then compare results we see down the road?