WINSTON-SALEM – BB&T Corp. has received preliminary approval to get $3.1 billion in government bailout funds. Bank officials say the funds will strengthen their lending ability and open other strategic options but many financial experts worry this is a bad allocation of federal money.

When talks of a bailout first surfaced, BB&T said it was one of the larger banks faring well in the economic crisis because it stayed away from sub-prime lending, but now, the bank is benefiting from the bailout. In exchange for its investment, the U.S. Treasury will receive shares of BB&T preferred stock at a 5 percent interest rate for the first five years.

The treasury will also get 10-year warrants to buy common shares of BB&T stock.

In a statement, BB&T chairman and CEO John Allison said, "fortunately, our own strong capital position has allowed us to meet the lending needs of our clients, even during this economic downturn. For us, the additional capital will not only extend and strengthen our lending capacity, but provide other strategic options as well."

So while this appears to be a good deal for BB&T, some financial experts fear this is a bad use of federal bailout funds.

“'If somebody walks up to you and says to you, ‘I'll lend you $3 billion at a very low interest rate,’ well of course you're going to say yes, but whether that's the best use of the taxpayers’ money is another question,” said Wake Forest finance professor Robert Bliss.

Bliss feels the Fed shouldn't be spreading the wealth to banks that don't need it but should rather focus on institutions that do, like BB&T's neighbor on West Second Street.

"Wachovia needed it, Citi probably needed it, [Bank of America,] I'm not sure,” he said. "The CEO of BB&T has said that these programs are for troubled banks and designed for troubled banks, not for healthy banks."

In a separate statement released Tuesday, Allison said it was important from a business perspective that the company take advantage of the same low capital costs as its competitors.