« Signs That Your Bank May Not Be in Good Health | Main | Banken mit Standard & Poor’s AAA – Rating, AA – Rating »
10 Banks to Repay Bailout Money
By Martin | June 10, 2009
Although banks continue to receive many types of federal support including loans, banks are increasingly able to attract private capital, to trade securities and to give consumers confidence that their deposits are safe, experts said.
“I think it’s fair to say that the force of the global storm is receding a bit,” Treasury Secretary Timothy F. Geithner said. “We want to see a financial system that’s strong enough that it’s going to be able to support a reasonable recovery. And we’re in a much better position today than I think we could have expected to have been . . . six weeks ago, two months ago, three months ago, four months ago.”
The 10 banks could repay as much as $68 billion of the $199 billion invested in more than 600 banks under the capital purchase program, a part of TARP. In addition, the federal government has received $4.5 billion in dividends on its investments, earning a higher interest rate than it currently pays to borrow. The repayments will go into the Treasury Department’s general account, allowing flexibility to reuse the money to stabilize the financial system.
But Tuesday’s milestone hardly signals that the U.S. banking system is on a path to normalcy any time soon, economists say. Three of the nation’s biggest banks aren’t on the list of those healthy enough to repay the funds: Citigroup Inc., Bank of America Corp. and Wells Fargo & Co. All three were told by regulators last month to raise additional capital.
One Treasury official warned that the optimism expressed by Geithner is tempered by the reality that many banks that are not considered too big to fail are at risk of doing just that. This year, 37 banks have failed, up from 25 for all of 2008 and only three in 2007. Among the failures this year was Bank United in Florida, which had assets of $12.8 billion when it collapsed last month in the downdraft of the Florida real estate market.
“The entire risk-management structure of some of these banks is completely out of balance,” said the official, who asked not to be named because he wasn’t authorized to speak publicly.
The Treasury did not identify the institutions authorized to make repayments, but the 10 banks put out their own disclosures. They are American Express Co., BB&T Corp., Bank of New York Mellon Corp., Capital One Financial Corp., Goldman Sachs Group, JPMorgan Chase & Co., Morgan Stanley, Northern Trust Corp., State Street Corp. and U.S. Bancorp. Not all of the banks indicated how quickly they would repay the money.
Many of the banks have been itching to repay the TARP money, saying they were forced to take it last fall by then-Treasury Secretary Henry M. Paulson. They also have chafed at strings attached to the aid — including caps on executive pay and restrictions on dividend payments — not to mention the public relations cost for getting what many Americans view as a bailout.
“A lot of these institutions just don’t want the government meddling in private business,” said Kris Niswander, associate director of financial institutions at research firm SNL Financial in Charlottesville, Va.
The limits on compensation were “a hotbed issue” that bankers viewed as a “slap in the face,” Niswander said.
At the depth of the crisis, there were loud calls for major reforms that would strengthen supervision in the nonbanking sector, particularly hedge funds, insurance companies and investment banks. Former Federal Reserve Chairman Paul A. Volcker was brought in to lead the reforms, but he has been largely silent.
“Volcker is on the bench,” Johnson said. “We need him off the bench and in the game. We are letting the opportunity slip away.”
Topics: market risk | No Comments »
Comments
You must be logged in to post a comment.