US lets 10 big banks start repaying bailout moneyJune 9th, 2009 - 9:54 pm ICT by IANS
By Arun Kumar
Washington, June 9 (IANS) The US government has cleared the way for 10 big banks to start repaying billions of dollars in bailout funds, a crucial step in easing the adminstration’ grip after an unprecedented series of interventions.
The banks were deemed strong enough to leave the Troubled Asset Relief Programme (TARP) after months of lobbying and strong performances on recent stress tests, the New York Times reported Tuesday.
The banks are expected to return about $68.3 billion to the Treasury Department, more than double the administration’s initial estimate of about $25 billion in funds to be returned this year. The timetable is also earlier than government officials originally intended.
“These repayments are an encouraging sign of financial repair, but we still have work to do,” Treasury Secretary Timothy F. Geithner said in a statement.
Although the Treasury Department did not identify the banks, the Times cited people briefed on the situation as saying they include American Express, Bank of New York Mellon, the BB&T Corporation, Capital One Financial, Goldman Sachs, JPMorgan Chase, the State Street Corporation and US Bancorp.
All passed the stress test and applied to return their TARP funds. Another bank, Morgan Stanley, which needed to raise $1.8 billion after the stress test, was also said to have received permission, as was Northern Trust, a large custodial bank that did not undergo the stress test.
The $68.3 billion represents about a quarter of the TARP money given to banks. So far, 22 small community banks have been allowed to return $1.9 billion in government money.
Within the next few days, the big banks will be able to wire the money back to the Treasury Department. Still, they will not fully get out from under the government’s thumb until they rid themselves of warrants giving taxpayers a share of the potential upside on their investments.
Analysts cited by the Times said warrants for the 10 big banks could be worth as much as $4.6 billion. Treasury officials have not disclosed how they plan to value and sell them.
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