Ten banks have been allowed to pay back their TARP (Toxic Asset Relief Program) funds, reports CNNMoney.com. The decision will return an expected $68 billion of federal money to taxpayers. Check out a segment of their story below.
Ten leading banks won approval to repay money from the government's controversial TARP program, regulators said Tuesday, which could represent approximately $68 billion in bailout funds returned to taxpayers.
The Treasury Department, which has overseen the $700 billion Troubled Asset Relief Program, did not indicate which banks were included in that group, although most lenders confirmed the news separately.
Eight of the nine banks that were found to not need new capital following the government's bank stress tests last month made the list. JPMorgan Chase (JPM, Fortune 500), Goldman Sachs (GS, Fortune 500), American Express (AXP, Fortune 500), Bank of New York Mellon (BK, Fortune 500), State Street (STT, Fortune 500) as well as regional banking giants Capital One (COF, Fortune 500), BB&T (BBT, Fortune 500) and U.S. Bancorp (USB, Fortune 500) all said they will pay back TARP funds. (Insurer MetLife also was not required to raise capital but it did not receive any TARP money.)
Investment bank Morgan Stanley (MS, Fortune 500), which was the only financial firm that regulators did ask to raise money after the stress tests, confirmed it also won approval from the Treasury Department to pay back $10 billion.
Chicago-based Northern Trust (NTRS, Fortune 500), which took in $1.576 billion under the program but was not part of the bank stress tests, also announced Tuesday it is paying back TARP funds.
So far, the Treasury Department has allowed nearly two dozen small, mostly community-based lenders to redeem the government's preferred shares, representing nearly $1.9 billion in taxpayer money.
Should the latest banks agree to redeem the company's preferred-shares the government acquired last fall, that would represent approximately another $68 billion in TARP repayments.
"These repayments are an encouraging sign of financial repair, but we still have work to do," Treasury Secretary Tim Geithner said in a statement.
Proceeds received from those 10 banks will be applied to the Treasury Department's general account, the agency said Tuesday, some of which be will used to promote financial stability should the economy take a turn for the worse. A portion of those funds will also be used to reduce Treasury's borrowing and the nation's rapidly rising level of debt.
The banks that buy back the government's stake will also be able to repurchase the warrants, or rights to purchase shares at a future date, the government acquired when it injected capital into many of these banks late last year.
Treasury said those obligations could be purchased at "fair market value", but did not offer details on how that would be determined.
There has been talk that the government may auction those warrants on the open market in order to quell criticism about their pricing. Some have charged that allowing banks to redeem warrants at too cheap of a price would be to the disadvantage of U.S. taxpayers who stand to make significant gains should bank stocks continue to move higher in the months and years ahead.
