As many as 10 banks will repay TARP

As many as 10 banks that took TARP funds will be allowed to repay the money. It is not clear why. The Treasury and Fed have indicated concern that the firms may need some of the money back if the credit markets come under siege again. But the government may also want to replenish the TARP with money that may have to go to the auto sector and insurance firms.

Banks want out from under the pay rules that owing TARP money requires. They also don't want the government to own equity in their operations, a way for federal agencies to exert power over their decisions.

Whatever the reason, JP Morgan (JPM), Goldman Sachs (GS), and other banks the government deems "healthy" will pay back the money that they took or, in some cases, was forced on them last December.

According to CNBC, some banks have announced the amount of TARP funds they intend to pay back ahead of the Treasury's formal announcement. Morgan Stanley (MS) says it will repay $10 billion, U.S. Bancorp (USB) $6.6 billion, Capital One (COF) $3.55 billion and BB&T Corp. (BBT) $3.134 billion.

There are still plenty of skeptics who see more troubled times ahead for the financial sector. According toBloomberg, "None of this means that we're out of the woods yet; there's a lot of work that the banks have to do and the regulators have to do," said Richard Spillenkothen, a director at Deloitte & Touche LLP

If the skeptics are right, it would point to significant flaws in the "stress test" process that 19 large banks went through. These tests were supposed to determine the viability of firms under extremely adverse economic circumstances. But taxpayers get some of their money back, at least for the time being.

Douglas A. McIntyre is an editor at 24/7 Wall St.

Read Full Story
  • DJI27094.79-52.29-0.19%
  • NIKKEI 22522044.450.000.00%
    Hang Seng26468.95-285.17-1.07%
  • USD (PER EUR)1.100.00050.04%
    USD (PER CHF)1.01-0.0006-0.06%
    JPY (PER USD)108.00-0.0330-0.03%
    GBP (PER USD)1.25-0.0005-0.04%