Tuesday June 9, 05:51 PM
10 US banks cleared to repay Treasury $68 bln
By Rob Lever
WASHINGTON (AFP) - The US Treasury gave clearance Tuesday for 10 major US banks to repay a total of 68 billion dollars for government capital injections made to stabilize the financial system.
The Treasury made the announcement a day after the Federal Reserve said the 10 banks ordered to raise new capital following "stress tests" had 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 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.
A number of banks immediately announced their intention to repay money they borrowed from the Treasury under the Capital Purchase Program, formerly known as the Troubled Asset Relief Program (TARP).
JPMorgan Chase said it would repay the Treasury in full for a 25 billion dollar investment, along with dividends "at a closing time determined by the US Treasury."
"Paying back TARP at this time is the right thing for JPMorgan Chase, and it's the right thing for our country," said Jamie Dimon, chairman and chief executive. "We feel it's best for our government to be able to use these funds for other critical purposes."
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.
Goldman Sachs (NYSE: GS - news) said it would repay the Treasury's 10 billion dollars.
"We are grateful for the government's extraordinary efforts and are pleased to be able to return to the US Treasury the funds that were invested in Goldman Sachs," said Lloyd Blankfein, chairman and chief executive.
Others announcing plans to repay the government included American Express (NYSE: AXP - news) (3.39 billion), Capital One Financial (NYSE: COF - news) (3.55 billion dollars), US Bancorp (NYSE: USB - news) (6.6 billion), BB&T Corporation (3.134 billion), State Street Corporation (NYSE: STT - news) (2.0 billion) and The Bank of New York Mellon (3.0 billion).
Combined with repayments from smaller banks, the Treasury will have received some 70 billion dollars in repayments.
"These repayments are an encouraging sign of financial repair, but we still have work to do," said Treasury Secretary Timothy Geithner.
The Financial Services Roundtable, a group of major finance firms, welcomed the news.
"The financial services industry is well-capitalized," said Steve Bartlett, president and CEO of the group. "This is a positive sign for the industry and the economy."
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 about 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.
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