Big Banks Get Green Light To Repay Bailout Money

Ten of the nation's largest banks have received a green light from the Treasury Department to repay $68 billion in government bailout money that they got during the height of the financial crisis.

The banks have been busy strengthening their balance sheets in recent weeks by raising private capital. Tuesday's move raises hope that the worst of the banking crisis is over.

The ten banks, including JPMorgan Chase, Capital One and Goldman Sachs, all got a clean bill of health following the recent stress test administered by government regulators.

Many had voiced a desire to pay back the money. Some had taken it very reluctantly, at the insistence of the Bush administration as it was trying to stabilize the financial system and insure that banks had money to lend.

Along with the money came government limits on compensation for executives, which the banks are anxious to escape.

As the financial system has stabilized and the economy has shown signs of bottoming out, a number of the banks have been able to raise new capital from investors.

If the 10 large banks repay the full $68 billion, it would be a development welcomed by Congress and taxpayers. Added to loans already repaid by some smaller banks, it would bring the amount of TARP funds recovered to $70 billion. That's about one-third of the nearly $200 billion the Treasury has injected into the nation's banks.

The banks that repay their TARP loans will also have the right to buy back warrants that the government received when it gave the loans. Those warrants give the government the right to buy stock in the banks. The Treasury says the banks will have to buy back the warrants at fair market value.

Related NPR Stories

Comments

 

Please keep your community civil. All comments must follow the NPR.org Community rules and terms of use, and will be moderated prior to posting. NPR reserves the right to use the comments we receive, in whole or in part, and to use the commenter's name and location, in any medium. See also the Terms of Use, Privacy Policy and Community FAQ.

Support comes from: