New York Community Bancorp gets OK for $596M aid
December 31, 2008

New York Community Bancorp Inc. said Wednesday it was approved to receive $596 million as part of the government's $700 billion bank investment program.

The government investment, administered by the U.S. Treasury Department, is part of a broader program to invest in banks amid the ongoing credit crisis in an effort to stabilize the financial services sector and spur lending between banks and to consumers and other businesses.

Many banks have been hit hard over the past year-and-a-half by a sharp rise in mortgage defaults and a freezing of credit markets. As some financial firms collapsed in recent months, banks shied away from lending to each other and to customers for fear that losses would mount.

The program calls for the U.S. Treasury Department to receive preferred stock and warrants to purchase common shares in return for the investment. The preferred stock carries an interest rate of 5 percent per year for the first five years. It then increases to 9 percent after five years if the preferred shares are not redeemed.

New York Community Bancorp (nyse: NYB - news - people ), which operates two banking subsidiaries with branches in New York and New Jersey, was already considered "well capitalized" by regulatory standards before receiving approval to participate in the government program.

Shares of New York Community Bancorp added 4 cents to $11.93 in afternoon trading.

(This version CORRECTS to say co. was approved to receive aid, not that it is receiving aid)

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