Starved for Capital, Lenders Call on Banks

Lenders who had relied on now-choked debt and equity markets for financing are increasingly looking to good old-fashioned bank deposits as a cheaper and more reliable alternative.

Chevy Chase, Md.-based commercial lender CapitalSource(CSE Quote), which lends to mid-sized businesses such as health care companies by raising debt in the capital markets, last month acquired flagging California bank Fremont General. The deal was done in the belief that dampened investor appetite for these securities will make this way of doing business untenable.

Private-equity investor MatlinPatterson is pursuing a similar strategy with its investment in Thornburg Mortgage(TMA Quote), according to investment bankers, investors and a report in The Wall Street Journal last month. ...