10 banks are approved to repay $68 B of TARP funds

Picture courtesy of Reuters

Without naming the banks allowed to repay the TARP funds, US Treasury Department officially announced today that 10 of the nation’s healtier banks are allowed to repay a total of $68 billion of taxpayer money; previously injected to help them out of the credit crisis. However, banks are likely to announce that they were making the repayment in the couple of days, according to Reuters.

US government received dividend-paying preferred shares and the repayments as the return of 700 billion taxpayer money pumped in under TARP programs. According to Reuters, “Banks that repay their preferred stock have the right to repurchase warrants that the Treasury holds in their firms at fair market value. The warrants give the government the right to buy common stock at a predetermined price for up to 10 years and are intended to give taxpayers a chance to share in the profits of healthy banks.”

Banks that are still in the government support will continue to have certain degree of restriction in spending, for example in the payment level of their executives. With repayment, the healthier Banks will be further separated and enjoy competitive advantage over their government-backed peers. These repayments, signal that some banks have actually capable and independent enough to raise money from private sector by issuing debt, without the help of government. Hopefully, the market will response with a gain in confidence that will speed up the recovery of the current financial crisis.

References:

http://www.reuters.com/article/ousiv/idUSTRE5582Y720090609

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