Spokane bankers are eyeing with some skepticism the federal government's offer to provide capital to some U.S. banks by becoming investors in them.

As the first deadline approaches on Nov. 14 to apply for the government's so- called Capital Purchase Plan, they're evaluating the offer with a mixture of distaste, analytical detachment, and competitive instinct.

Under the program, authorized by the recent U.S. Emergency Economic Stabilization Act, U.S. banks will acquire capital by selling the government preferred stock in their institutions. In exchange for each $1 million in preferred stock that the government buys, a bank would issue warrants good for the government's purchase of $150,000 of the bank's common stock.

"I thought at first that I didn't want the government to be an owner in our bank, but it's nonvoting stock," Randall L. Fewel, president and CEO of Inland Northwest Bank, says of the preferred shares that the government would buy. Such stock would give the government no power in a bank's decision-making processes, Fewel says.

"The more I look at this Capital Purchase Plan of the government's, the more it looks attractive," says Fewel. "It's cheap capital. Why not take some capital now on our balance sheet while we can? It could let us make more loans next year and position ourselves better for the future. If we don't take it and everybody else does, and we have to be in a slow-growth mode compared with everybody else, we could fall behind."

Therein lies the rub, Fewel says.

With the deadline looming for publicly traded banks to apply for capital, bankers here are looking squarely at the competitiveness issue as they decide whether to apply for the program.

If a bank doesn't obtain capital through the program, and a competitor does, "your competitor could end up with a competitive advantage," says Dan Byrne, executive vice president and chief financial officer of Sterling Financial Corp., which owns Sterling Savings Bank.

"It's an interesting proposition," he says. "We're looking closely at it. The program probably has more benefits than drawbacks."

It's still unclear how private banks will be able to participate in the program, although the American Bankers Association is working on determining that for its members, says Peter Stanton, chairman and CEO of Washington Trust Bank.

"My initial reaction is we don't need it, and we don't want it," Stanton says of the government's money. "My feeling is there's a stigma attached when you're getting help from the government when you don't need it."

He adds, "The thought of getting the federal government as a partner in a 106-year-old institution doesn't sit very well." Yet, says Stanton, "We can say for as long as we want that we don't need it and we don't want it, but are you going to be considered a weak link if you don't get it?"

While Inland Northwest Bank, Sterling, and Washington Trust aren't ready to disclose their plans regarding the program, AmericanWest Bank, of Spokane, said last week when it announced its third-quarter earnings that it would apply for approximately $57 million in capital, or the amount that it believes is the maximum it would be eligible to receive, under the program. AmericanWest reported a loss of $96.9 million, or $5.63 a share, in the quarter.

Brookly McLaughlin, a Department of Treasury spokeswoman in Washington, D.C., says that Treasury will disclose the names of banks that receive capital as soon as the institutions' applications have been approved and the transactions have closed. Thus far, that has happened with more than 50 banks, she says.

In each of the first five years after the government buys preferred stock, banks will pay the government annual dividends of 5 percent on the preferred stock, and they will pay annual dividends of 9 percent each year after that, McLaughlin says. The government will buy amounts of preferred stock equal to not less than 1 percent nor more than 3 percent of a bank's risk-weighted assets, or its assets as rated according to the likelihood of repayment.

For the common stock it buys with the warrants it receives, the government will pay a price that's equal to the average trading price of a bank's common shares on the 20 days before the government buys preferred shares from it, Treasury's Web site says.

With bank stocks depressed now, but likely to rise in the future, "the government can make money on this," Fewel says.

Byrne also thinks that's true.

"I think it's very creative the way they put this together," he says. He adds that while the Emergency Economic Stabilization Act has been referred to by some as a bailout, "The Treasury wants us to continue lending to stimulate the economy. It's much less of a bailout than an effort to get the economy going."