As publicly traded banks ponder whether to apply for the Treasury Department's Capital Purchase Program, thousands of private ones that are currently ineligible await details about how the government plans to include them.

After committing $125 billion to nine large banks, the Treasury intends to invest another $125 billion in regional and community banks by purchasing senior preferred shares.

But the program's requirements leave most banks on the sidelines. The 2,500 structured as S corporations and 550 mutual thrifts cannot issue preferred shares, and many other privately held banks anticipate major hurdles to doing so.

Treasury officials said Monday that they are working to include privately held banks, but so far they have provided no details.

One suggestion from Patrick J. Kennedy Jr., the president of the Subchapter S Bank Association Inc., is for Congress to amend the Internal Revenue Code to permit those taxed under Subchapter S to issue preferred stock.

The Treasury also could amend the program by letting privately held banks and thrifts issue trust-preferred securities instead of stock, Mr. Kennedy said.

Another potentially vexing issue for privately held banks is that the program requires participants to issue warrants for common stock, with the price based on the market value of their shares.

For banks whose shares are not traded publicly or are traded only lightly, determining the market value can be difficult.

Also, some private banks might be concerned that selling stock under the warrants would increase the number of shareholders they have and could require them to register with the Securities and Exchange Commission.

Mr. Kennedy said a phantom stock agreement would work as an alternative. "It would be an agreement between the bank and the government where the government would be paid in terms similar to the warrants but the bank wouldn't actually issue common stock."

Wayne Abernathy, the American Bankers Association's executive vice president for financial institutions policy, said another option is to substitute book value for market price when calculating how much the stock is worth. The Treasury also would have to assure privately held banks that issuing the warrants would not expand the number of shareholders, he said.

The ABA proposed several options to include mutual thrifts.

One is to modify the program to include the purchase of subordinated or senior debt. Another is for the government to purchase mutual capital certificates.

"Instead of buying into the stock, you can buy into the debt, but it's debt that is considered capital," Mr. Abernathy said.

The capital certificates would revive a program developed in the 1980s by the Federal Savings and Loan Insurance Corp. That program never got off the ground, because the agency ran out of money, but it gave mutuals the authority to issue net worth certificates, Mr. Abernathy said. "The authority for it is already on the books."

Mutual holding companies that have issued shares to investors can particiapte in the Treasury program in its current form, he said. But many of the 143 mutual holding companies nationwide would be left out because they are not publicly traded.

Though publicly held banks hold the bulk of the industry's assets, they account for just about 11% of the nation's roughly 8,450 banks and thrifts.

Cynthia Blankenship, the chairman of the Independent Community Bankers of America, said expanding the Capital Purchase Program to include more banks is a topic that came up in a meeting her group had Friday with Treasury Secretary Henry Paulson.

"He emphasized that this was a plan for all banks, but we made the point that there are some technical corrections that need to be done to allow mutuals and privately held banks and Subchapter S corporations in the program," she said. "They indicated they would be giving that their attention in the next couple of weeks."

Ms. Blankenship is the vice chairman of the $280 million Greater Southwest Bancshares Inc. in Grapevine, Tex. She said her company, which is structured as an S Corp, would consider participating in the program.

Karen Thomas, the ICBA's executive vice president for government relations, said the Treasury program places restrictions on paying dividends, and that might be problematic for S Corps, which have pass-through tax status.

"Shareholders have to pay the income tax on what the bank earns, so frequently the bank will dividend out money so that the tax can be paid," she said. "In many privately held banks, dividends represent a chief form of compensation for the bank principals."

Banks must apply by Nov. 14 to participate in the program. Ms. Thomas said that if the lingering issues are not resolved in a few days, the Treasury should consider extending the deadline.

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