Nov. 11 (Bloomberg) -- The Treasury Department program for shoring up the U.S. financial system is meeting resistance from community bankers wary that Congress may change terms of their contracts with the government after they agree to participate.

Executives at an American Bankers Association conference in San Francisco yesterday cited lawmakers' comments about future restrictions on compensation and dividends as barriers to taking part in the Treasury's capital purchase program, which is aimed at using $250 billion to buy equity in U.S. banks.

``If we entered into contracts with our customers that allowed us to unilaterally change the deal later on, we would be crucified,'' said Arthur Johnson, chairman and chief executive officer at United Bank of Michigan. ``What I would really like is an offer that is complete, that is governed by the four corners of a contract that you can analyze,'' said Johnson, whose Grand Rapids, Michigan-based bank has $420 million in assets.

Treasury Secretary Henry Paulson last month said he would use $250 billion from the government's $700 billion financial rescue package to inject capital into U.S. banks. He allocated $125 billion to nine large banks. Publicly traded lenders have until Nov. 14 to apply for the remaining funds.

Bankers at the ABA conference said the provision that would let Treasury change the terms of their agreements based on the future actions of Congress is giving them pause.

``I'm not going to sign one until I know what I'm signing,'' said Julie Cripe, president and CEO of Houston-based OmniBank, which has $400 million in assets.

Dividends, Pay

Senator Charles Schumer, a New York Democrat, wants firms to place limits on dividends and executive pay before getting capital under the program. House Financial Services Committee Chairman Barney Frank, a Massachusetts Democrat, has called for a moratorium on Wall Street bonuses.

``The way the agreement is worded it's like signing a lease where the landlord can change any term the landlord wants, including the rent, at any time,'' ABA President Edward Yingling said in an interview yesterday. ``Not only that, but you're going to have a new landlord in a couple of months. And so there's so much uncertainty about it, and I think that's the main reason for the reluctance.''

Almost half the bankers participating in a survey at the conference said they wouldn't apply for the capital purchase program, with 49 percent voting no, 31 percent voting yes and 20 percent undecided. About 1,700 people, most of them community bankers, attended the conference.

``I don't like the notion of not knowing what future changes may take place if you decide that you want to participate in the capital purchase program and Congress decides to make changes next year,'' said John Reich, director of the Office of Thrift Supervision, the Washington-based regulator of savings and loans. ``I can understand certainly the reluctance of a well-capitalized bank doing well for it to want to participate in the program.''

The American Bankers Association has ``raised and expressed our concerns to the Treasury Department about this,'' said Diane Casey-Landry, the group's chief operating officer.

To contact the reporter on this story: Alison Vekshin in San Francisco at avekshin@bloomberg.net;

Last Updated: November 11, 2008 00:01 EST