Tuesday June 9, 03:54 PM
10 banks cleared to repay Treasury $68 billion
By Rob Lever
WASHINGTON (AFP) - Ten major US banks were approved Tuesday to repay the Treasury a total of 68 billion dollars for capital injections made to stabilize the financial system.
The Treasury, without naming any specific banks, made the announcement a day after the Federal Reserve said the 10 banks ordered to raise new capital following "stress tests" have developed sufficient programs to shore up their finances.
"Following consultation with the primary banking supervisor of each institution, Treasury has notified the institutions that they are now eligible to complete the repayment process," a Treasury statement said.
"If these firms choose to do so, Treasury will receive 68 billion dollars in repayment proceeds."
The Treasury statement noted that the repayments "follow a period in which many banks have successfully raised equity capital from private investors" and had issued long-term debt not guaranteed by the government.
Several banks immediately announced their intention to repay the Treasury.
Morgan Stanley (NYSE: MS - news) said it "is pleased to be repaying its 10 billion dollars in TARP capital with an attractive return for taxpayers."
"We believe this positive development reflects both Morgan Stanley?s strong capital position as well as the important systemic role the TARP program played in helping stabilize the US banking system since the height of the financial crisis," the group said.
Capital One Financial (NYSE: COF - news) said it would repurchase the 3.55 billion dollars in preferred shares "in the coming weeks." US Bancorp (NYSE: USB - news) said it would redeem the 6.6 billion dollar capital investment.
BB&T Corporation said it would repay its 3.134 billion dollars to the Treasury.
"This is an important achievement for BB&T," said chief executive Kelly King.
"Repaying the government's investment will give us greater flexibility to benefit significantly from future opportunities that will be available as we emerge from this recession. In addition, we will become even more focused on the business of serving our clients, rather than dealing with government distractions."
Combined with repayments from smaller banks, the Treasury will have received some 70 billion dollars in repayments under the Capital Purchase Program, formerly known as the Troubled Asset Relief Program (TARP).
"These repayments are an encouraging sign of financial repair, but we still have work to do," said Treasury Secretary Timothy Geithner.
Firms that repay their preferred stock have the right to repurchase the warrants -- or rights to purchase additional shares -- Treasury holds at fair market value.
The 10 banks have paid dividends on the preferred stock totaling approximately 1.8 billion dollars over the last seven months and all dividends from the TARP program have amounted to 4.5 billion dollars to date.
The Treasury said it had invested 199 billion dollars in 600 banks under TARP, which gave the government authority to commit 250 billion dollars to bank recapitalization.
Some banks had argued that the capital program was forced on them and imposed conditions such as limits on executive compensation, and raised fears about government meddling in bank operations.
The Fed had said the banks "must demonstrate an ability to access the long-term debt markets" without government guarantees "and must successfully demonstrate access to public equity markets."
|
Send Article by Email
Send Article by IM
Blog This with Y! 360
Printable View
