Denationalization

10 June 2009



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Treasury Lets 10 Banks Repay $68 Billion in TARP Funds

The US Treasury has decided that 10 of the banks involved in the Trouble Asset Relief Program have sufficient strength to no longer need TARP funds. Consequently, those 10 may repay the Treasury what they accepted in October and rid themselves of the strings that were attached to the funds. The total to be repaid is in the ballpark of $68 billion, around one third of what the Treasury doled out last autumn. In addition, the banks can buy back the warrants the Treasury took in exchange for the TARP money, “at fair market value.” That means, Mr. and Ms. Taxpayer will make a profit for rescuing the financial system, and the "socialism" Wall Street whined about turns out to have been short-lived.

The ten banks are:

  • JPMorganChase paying back $25 billion,
  • Goldman Sachs paying back $10 billion,
  • Morgan Stanley also paying back $10 billion,
  • US Bancorp paying back $6.6 billion,
  • Capital One paying back $3.5 billion,
  • American Express paying back $3.4 billion,
  • BB&T paying back $3.1 billion,
  • Bank of New York Mellon paying back $3.0 billion,
  • State Street paying back $2.0 billion, and
  • Northern Trust paying back $1.6 billion.
The effect of the Treasury's decision is to separate the sheep from the goats among the big banks. Several banks are still operating under TARP conditions with TARP funds, and therefore, they retain the “Scarlet Letter” of dubious financial strength. These banks include Wells Fargo, Citibank and Fifth Third Bank.

The payments are a source of contained optimism for the financial sector. As Treasury Secretary Timothy Geithner said in a statement yesterday, “These repayments are an encouraging sign of financial repair, but we still have work to do.” William Lefkowitz, an options strategist with VFinance Investment, put it better when he told Reuters, “People should be pretty comfortable that now the government is allowing these banks to pay the TARP money back, they fully believe that the worst is behind us.” Or Sir Winston Churchill's words (admittedly spoken in a different context) apply, “Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.

© Copyright 2009 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Fedora Linux.

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